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Information that has a bearing on investment in securities can be given otherwise than by means of prospectus/listing particulars, for example, by way of advertisements, press releases, or mini-prospectus. The Financial Services and Markets Act 2000 (FSMA) prohibits any promotion of investment activity unless it comes from an authorised person or the content of the promotion is approved by an authorised person. The FSMA 2000 Financial Promotions Order 2005 (FPO) sets out the way that financial promotions are controlled and the exemptions to the prohibition against financial promotion in FSMA.
The prohibition extends to financial promotions which are made outside the UK but which may have an effect in the UK. This would cover advertisements of a global share offering of shares of a company listed on the London Stock Exchange, for instance. It would also cover financial promotions which don't originate in the UK, but which target investors who are in the UK.
It is a criminal offence to breach the prohibition and companies must be very careful to ensure that any promotional material complies with the FPO.
In addition to the statutory rules governing financial promotions, wherever a prospectus is required to be published, companies need to follow the rules regarding advertisements set out in the Prospectus Rules (PR). The PRs govern the content and structure of prospectuses in the UK and are made by the Financial Services Authority (FSA) in terms of its capacity as competent authority. For more information see our 'Parties involved in the listing process' article
PR 3.3: No advertisement relating to an offer of securities to the public or admission to trading may be issued unless it complies with strict guidelines.
Advertisement is widely defined and includes any announcement relating to a specific offer of securities which promotes the subscription or acquisition of those securities.
The advertisement must not be published unless:
1) It states that a prospectus has been or will be published and indicates where investors are, or will be, able to obtain it
(2) It is clearly recognisable as an advertisement
(3) Information in the advertisement is accurate, and not misleading
(4) Information in the advertisement is consistent with the information contained in the prospectus, if already published, or with the information required to be in the prospectus, if the prospectus is published afterwards
Written advertisements should also contain a bold and prominent statement to the effect that they are not a prospectus, but an advertisement, and investors should not subscribe for any transferable securities referred to in the advertisement, except on the basis of information in the prospectus.
