The PISCES Regulations: Private Company Share Trading

This initiative, spearheaded by HM Treasury and the Financial Conduct Authority ("FCA"), aims to modernise capital markets by enabling intermittent trading of private company shares. The PISCES Regulations mark a significant shift in how private companies can access liquidity and investment. The system is designed to act as a bridge between public and private markets, allowing private companies to conduct regulated share trading events without the full burden of public market regulation.

The FCA will publish their rules underpinning PISCES shortly after the PISCES Regulations come into force. Thereafter, those wishing to operate PISCES trading events can apply to the FCA for authorisation. We expect to see the first PISCES trading events take place later this year.

The PISCES Regulations outline key features of the PISCES system, which are summarised below:

1. What can be traded on PISCES?

PISCES will facilitate the sale of existing private company shares which are held by existing shareholders. The regime will not facilitate the offer or sale of new shares and therefore will not be a means of raising new capital for unquoted companies. The PISCES Regulations also prohibit intermediaries from enabling PISCES companies to use the platform for buybacks.

In order to be traded on PISCES, shares will need to be freely transferable and not admitted to trading on a public market (in the UK or abroad).

PISCES operators can determine any admission requirements for their markets, including any minimum corporate governance requirements.

Companies will have discretion on when the shares may be traded, who is allowed to buy the shares and the price at which the shares are traded, subject to their PISCES operator’s business model and FCA rules.

2. Who can trade on PISCES?

Founders, early-stage investors and employees will be able to sell shares on PISCES. However, only professional investors, institutional investors and certain retail investors meeting stipulated criteria will be able to buy shares on the platform. In respect of investors, the regime adopts a 'buyer-beware' philosophy that assumes a higher level of investor diligence and risk tolerance.

3. Who can be a PISCES operator?

PISCES platform operators must apply to the FCA and are responsible for tailoring disclosure and governance standards to the nature of the companies and investors they serve. PISCES platform operators must be a legal entity established in the UK and either:

• have a Part 4A permission under the Financial Services and Markets Act 2000 ("FSMA 2000"); or

• be a recognised investment exchange.

4. When can shares be traded on PISCES?

Companies can host periodic trading windows, offering liquidity to shareholders while maintaining private company status.

5. Disclosure requirements

Unlike public markets, PISCES does not impose full prospectus-level disclosures. Instead, companies must provide a 'core information' package, including:

• Business and management overviews

• Financial summaries and forecasts

• Capital structure and shareholder information

• Employee share scheme and directors' transactions information

• Material contracts and litigation

6. Modifications to existing laws following the PISCES Regulations

The implementation of the PISCES Regulations will mean that a number of existing laws will be amended. Key modifications include:

• The Companies Act 2006 ("CA 2006") will be amended to: (i) ensure that trading of existing shares on PISCES will not constitute an indirect offer to the public by the participating company; (ii) grant participating companies power to require information from investors where they believe them to have interests in the company’s shares; and (iii) limit the burden on participating companies that cease to be public limited companies (PLCs).

• The Prospectus Regulation will be disapplied, ensuring that placing shares on PISCES will not trigger a requirement to produce a prospectus.

• The Financial Promotion Order 2005 will be modified to create a new exemption for a PISCES operator's disclosure arrangements.

• FSMA 2000 will be amended to tailor, retain and where relevant, extend the FCA's supervisory and enforcement powers to sandbox activities.

7. Implications on Enterprise Management Incentives ("EMI") and Company Share Option Plan ("CSOP")

The introduction of PISCES will allow private companies to offer liquidity to employees participating in employee share and share option arrangements. Intermittent PISCES trading windows can be opened allowing employees to sell shares acquired through option exercises (or other means) which previously would not have been tradable in the absence of an exit event or facilitated internal market.

Due to lack of liquidity, it is common for options, particularly tax-advantaged Enterprise Management Incentive ("EMI") options and Company Share Option Plan ("CSOP") options, to be granted on an "exit-only" basis. This means that they can be exercised only in connection with specific corporate events (such as a share sale or an IPO). Under general principles, any amendment to the exercise trigger of an EMI or CSOP option, is treated as an effective surrender and re-grant, causing the loss of tax efficiency.

However, the Government has announced that the upcoming Finance Bill will introduce legislation allowing employers, with their employees' consent, to amend existing EMI and CSOP options to include a PISCES trading event as a new exercise trigger, without forfeiting their tax-advantaged status. This announcement is a welcome update following the technical note published at the time of the Spring Statement 2025, which highlighted that tax-efficient exercise of EMI and CSOP options in connection with a PISCES trading window would only be permitted if specifically included in the relevant option agreement. It has also been confirmed that the legislation will have a retrospective effect, and in the interim HMRC will be able to use collection and management powers to not collect tax on exercise. This means that EMI and CSOP option holders will be able to benefit from the change in the first PISCES trading events expected later this year.