P.I.S.C.E.S. – Private Intermittent Securities and Capital Exchange System

What is it?

Private Intermittent Securities and Capital Exchange System ("P.I.S.C.E.S.") is a new proposal by the UK Government to create a system to allow for intermittent trading in private company securities with a view to providing a market-place and opportunity for liquidity pre-IPO.

It will provide a legal framework for UK Financial Conduct Authority ("FCA") approved operators to hold trading events with the aim of providing a secondary market for eligible private companies during certain "trading windows" to facilitate the multilateral trading of shares – similar to the existing capital market offerings. Investors and companies will continue to be able to trade in the private market to enable share buybacks and capital raising though share issues which are not permissible under the P.I.S.C.E.S. scheme;

Goals

• To improve the interface between private companies and UK public markets;
• To support company growth and scalability;
• To provide routes for liquidity and realisation of gains for shareholders / investors;
• Rationalization / diversification of shareholder base for companies;
• Better access / opportunities to invest in private companies for investors;
• Greater transparency and efficiency for private market offerings.

 Pros:

• Opportunities for liquidity for investors and employee shareholders;
• Enhanced new investor protections;
• Reduced disclosure requirements;
• Opportunities to open shares up to new audiences;
• Stamp duty exempt.

Cons:

• Open only to unlisted companies;
• Open to limited types of investors;
• FCA permission required;
• Operation of multi-lateral trading facility, organized trading facility or recognized investment exchange needed;
• Trading of existing shares only (no new shares);
• Intermittent trading only;
• No ability to carry out buybacks;
• Potential insider trading.

Disclosure - Deeper Dive

Whilst the disclosure process and requirements are yet to be agreed, it is likely that the initial disclosures, which would be made available shortly before the trading window, will not be made publicly, instead, these would only be available to potential investors.

The disclosures may include, inter alia:

1. Insider information;
2. Details regarding share ownership;
3. Senior management transactions;
4. Price parameter information;
5. Investor restrictions.

Eligibility

Open to (subject to the discretion of operative):

• Any company (private or public) not trading on a public market in the UK or abroad, including foreign companies;
• Companies with no transfer restrictions in their articles (may require amendment of articles for certain companies);
• Limited to institutional, high net worth or professional investors  (possibly to include a small number of retail investors);
• Employees of companies participating in P.I.S.C.E.S. and those in the immediate corporate group of participant companies, provided their employment is connected to the participant company’s business;
• Existing shareholders with the option to sell their shares in a manner similar to those under employee share schemes.

Next Steps

Further to the responses and feedback received on the initial proposal in 2024, Rachel Reeves confirmed in her Mansion House speech that the government were committed to establishing P.I.S.C.E.S. and were planning to open the regulatory sandbox by May 2025[1].

The Government intends that P.I.S.C.E.S. is subject to a proportionate and bespoke regulatory regime which will be developed within the financial markets infrastructure sandbox. The sandbox environment will allow the Government to temporarily modify provisions of the applicable legal framework (including the Companies Act 2006, Financial Services and Markets Act 2000 and other legislation) whilst the regime is tested during the trial period. 

The FCA have now launched a consultation on the proposed regulatory framework. The P.I.S.C.E.S. Regulations will give the FCA broad powers to make rules to implement and operate the P.I.S.C.E.S. sandbox which is expected to run for five years.

For a more detailed look at the government response paper, please see here.

[1] https://www.fca.org.uk/firms/innovation/regulatory-sandbox