PISCES: A new private stock market

The FCA has announced the final rules for its Private Intermittent Securities and Capital Exchange System (PISCES). PISCES is a new type of platform where shares in private companies can be traded. As companies choose to stay private for longer, PISCES should give investors the opportunity to trade private company shares easily and efficiently in an organised marketplace.

What is PISCES?

PISCES is a new type of regulated trading platform designed to facilitate the intermittent trading of existing shares in private companies. It will operate as a secondary market for the sale of existing shares only; it cannot be used for a primary fundraising. It will, however, offer a potential exit for existing investors in private companies without the need to wait for an IPO or M&A deal. For those companies with employee shareholders, it will provide liquidity in those shares for employees and make ownership of shares a more attractive proposition.

The PISCES platform will be operated as a multilateral system by firms approved by the FCA (PISCES operators).

Who can participate?

All UK and overseas companies that do not already have shares admitted to trading on a public market in the UK or overseas will be eligible to participate.

Who will be able to sell?

In theory, any existing shareholder will be able to sell shares. In practice, however, a company will be able to set certain parameters (see below).

Who will be able to buy?

Initially, only the following categories of investors will be able to buy shares:

• Institutional investors.
• Employees of participating companies.
• Those who meet the definitions of self-certified sophisticated investors, certified sophisticated investors or high net worth individuals under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

Companies may also impose additional restrictions on investor types (see below).

What parameters can a company set?

Companies will be able to:

• Set minimum and maximum prices.
• Set limits on trade sizes.
• Determine the frequency of trading windows (eg, ad hoc, monthly, quarterly, or annually) and their duration.
• Restrict access to certain investor types.
• Exclude competitors.
• In relation to employees, decide which employees can sell and how many shares they can sell.

What disclosure will be required?

The PISCES regime will not include a public market style market abuse regime. There will be no requirement to identify and disclose “inside information” on a continuous basis.

Before the start of each trading window, a company will have to make available on its chosen PISCES platform certain “core” information about itself and the shares to be traded.  The “core” disclosure information is set out in PS 2.3 of the PISCES sourcebook, included as an Annex to the Private Intermittent Securities and Capital Exchange System (PISCES) Instrument 2025. This includes (among other items):

• Overview of corporate and organisational structure and description of activities and products.
• Overview of management structure and details of directors and senior management.
• Financial statements.
• Significant changes since the end of the last financial period.
• Material risks relating to the company and its shares.
• Material contracts or agreements.
• Major shareholders (ie, a person who (i) holds over 25% of the shares or voting rights in the, or (ii) has the right to appoint a majority of the board, or (iii) exercises, or has the right to exercise, significant influence or control over the company).
• Confirmation of whether any price parameters are being applied and, if so, whether these were prepared with the agreement of another person (such as a key investor) and provide the identity of that person.

Core information need not be provided where:

• The company does not have access to the information.
• Its disclosure would likely prejudice the legitimate interests of the company.
• Contractual arrangements are in place with other parties which prevent its disclosure.

There is an overarching requirement on PISCES operators to ensure appropriate disclosure arrangements are in place for proper functioning of their markets. To meet this overarching requirement, PISCES operators may require companies to disclose certain additional information (over and above the “core” information) – including using a “sweeper-model” (disclosure of any other information the directors consider relevant to an investor's decision) or an “ask-model” (facilitating the provision of information in response to specific requests by investors).

Will the disclosures be made public?

Disclosures will be made available using a “controlled data room” model to all persons entitled to access the relevant trading event but will not need to be made public. That said, while PISCES operators will likely seek confidentiality undertakings from investors, companies should note the difficulties when it comes to enforcing such undertakings.

Can a company be liable if it publishes misleading information on a PISCES platform?

Yes – a company will be liable to compensate an investor if they suffer loss as a result of an untrue or misleading statement published on a PISCES platform. For “core” information, a company will not be liable if the directors reasonably believed the information to be true and not misleading (ie, liability would be judged on a “negligence” basis). For information that is not “core”, a company will only be liable if the directors knew the information to be untrue or misleading or were reckless as to whether it was (ie, liability would be judged on a “fraud / recklessness” basis).

Can companies use PISCES for share buybacks?

Companies will not be permitted to carry out share buybacks on PISCES at the initial stage. However, given the potential benefits in terms of liquidity, the UK government has said that it will revisit this at a later stage.

What are the tax implications?

PISCES transactions will be exempt from stamp duty and stamp duty reserve tax.

HMRC has published guidance on the tax implications of how PISCES trading events will interact with tax advantaged share schemes. You can read more in our article here.

Conclusion

This represents an exciting new development for the UK stock market landscape. There should be benefits for both companies and investors. Investors will have the opportunity to acquire shares in growth companies. Companies will have access to a broader range of investors and asset managers. It also offers existing investors in private companies the opportunity to exit without needing to wait for as M&A deal or an IPO. It might be particularly attractive to growth companies who operate employee share schemes as it should boost the attractiveness of those schemes.

The PISCES sandbox is now open, with shares likely to be traded later in 2025.