7.3.4 Prospectus requirements
Section 85 of FSMA requires organisations making a financial promotion to publish an FCA-approved prospectus if they are offering transferable securities. The prospectus requirements do not apply to non-transferable securities, such as withdrawable share capital in societies. There are also exemptions for the following:
- Transferable securities issued by charities
- Transferable securities issued by community benefit societies, if the money raised is used solely for the purposes of the issuer’s objectives
- Transferable securities offered by non-profit making associations or bodies similar to charities and community benefit societies, which could be taken to mean any organisation with a statutorily defined asset lock, such as a Community Interest Company
- Offers of transferable securities where the offer is being made only to qualified investors, or to fewer than 150 people, or where the total being sought is less than the sterling equivalent of €2,500,000.
Community benefit societies are only exempt from regulation when making public offers of transferable shares if the “proceeds of the offer will be used for the purposes of the issuer’s objectives” (see Schedule 11A, FSMA). This is taken to mean the objects of the society, as stated in its rules. However, transferable shares do not fit the definition of community shares (see Section 1.2.2). Section 2.2.3 explains why transferable shares are considered to be outside of the remit of the Community Shares Unit.