POATR - what are protected forward looking statements?
The Public Offers and Admissions to Trading Regulations 2024 (POATR) are overhauling the UK's prospectus regime, effective 19 January 2026. POATR and the corresponding framework seeks to make raising capital simpler, cheaper and quicker and to boost the overall competitiveness of our markets. Follow our mini-series of articles on POATR for an idea of what to expect.
The circumstances in which a prospectus is required have been amended (see our mini-series of POATR articles for more information) and changes to the content requirements of prospectuses have also been made.
A key change is the introduction of protected forward-looking statements (PFLS) (as defined in paragraph 10(1) of Part 3, Schedule 2 of POATR), a specific category of forward-looking statements given in a disclosure document such as a prospectus or MTF admission prospectus, being statements containing a projection, estimate, forecast or target, giving guidance, giving an opinion as to future events or circumstances or stating an intention.
The existing prospectus liability regime was felt to deter companies from including forward-looking statements in prospectuses on the basis that these statements carried a negligence liability standard, with the defendant having the burden of proving they were not negligent. Liability attaching to PFLS is now on a recklessness/ dishonesty standard, with the burden of proof shifting to the claimant. In practice this means that those responsible for the content of the prospectus will only be liable in relation to a PFLS if they knew the statement to be untrue or misleading or were reckless to it being untrue or misleading or if an omission of a material fact was dishonest (as opposed to accidental). This higher fault threshold should reduce litigation risk for companies, encourage disclosures by the company and ensure investors have a better and more detailed understanding of the company in question.
For a forward-looking statement to qualify as a PFLS, it must meet the criteria given in Chapter 8 of the Prospectus Rules: Admission to Trading on a Regulated Market sourcebook (PRM) issued by the Financial Conduct Authority.
A forward looking statement will be a PFLS if: (1) it contains financial or operational information; (2) the accuracy of the statement (i.e. whether untrue, misleading or incomplete) can only be determined by reference to events or circumstances which occur after the statement has been published; (3) it estimates when these events or circumstances are expected to occur; and (4) it contains information that a reasonable investor would be likely to use as part of the basis of their investment decision. A PFLS must also be accompanied by both a content specific accompanying statement (sitting immediately alongside the PFLS) and the prospectus must include a general accompanying statement explaining how PFLS in the prospectus are identified and alerting investors to their general characteristics. The PRM also sets out the requirements for the financial or operational information contained within a PFLS and these requirements should be carefully considered to ensure a PFLS is structured correctly and sits with the PFLS liability framework. If a forward looking statement does not meet the PFLS criteria, it will fall outside of the PFLS liability framework.
With the introduction of PFLS under POATR and the FCA’s PRM, companies may feel emboldened to include well-structured forward-looking statements that responsibly inform investors and support more efficient capital raising in their prospectuses. However, it remains to be seen how enthusiastically the use of PFLS will be embraced in prospectuses given that different and potentially stricter liability regimes may apply depending on where securities are offered e.g. the US and/ or EU.
