The Financial Conduct Authority (FCA) has launched the Private Intermittent Securities and Capital Exchange System (PISCES). Announced as an innovative sandbox initiative, PISCES represents a significant evolution in the structure and accessibility of private company shares, through periodic trading events under a tailored regulatory environment. Designed as a five-year pilot, the initiative seeks to test the viability of intermittent trading as a model for private shares, potentially reshaping how companies raise capital, manage liquidity events, and transition to public markets.
For Governance, Risk, and Compliance (GRC) teams, the launch of PISCES introduces several new dimensions of operational complexity, strategic risk management, and compliance oversight. Unlike traditional public markets, PISCES will give companies considerable control over the trading parameters of their shares—including investor eligibility, disclosure practices, and pricing methodologies. This “private-plus” model demands close scrutiny from compliance teams, requiring robust frameworks to oversee intermittent disclosure arrangements, investor categorization processes, and market integrity protections.PISCES requires the oversight of intermittent trading events, the management of insider information, and the implementation of new investor protection measures mandated by the FCA. The interplay between flexibility in trading arrangements and the stringent regulatory expectations embedded within the sandbox model requires firms to adapt their internal control environments and compliance monitoring capabilities.
This article examines the FCA’s latest policy statement (PS25/6), breaking down the key elements of the PISCES regulatory framework. By unpacking the governance expectations, highlighting the compliance obligations, and exploring the inherent risks of this new asset class, GRC leaders can better prepare their organizations for participation in, this new market.
The FCA provides detailed guidance on the role of ‘Platform Operators’ intermediaries—such as brokers, and investment banks—in the new PISCES market, particularly regarding their responsibilities around the promotion, distribution, and safeguarding of investments.
A platform operator in the context of the PISCES market is a regulated entity responsible for managing and overseeing a private securities trading platform. This operator facilitates intermittent trading events in shares of private companies, providing the underlying infrastructure and regulatory framework for buyers and sellers to interact.Platform operators have specific obligations, including establishing clear trading rules, ensuring disclosure standards are maintained by participating companies, managing market integrity through monitoring trading activity, and implementing appropriate transparency measures. They must also maintain adequate financial resources, comply with FCA-defined risk management standards, and report suspicious activities or breaches of rules to regulators.
In short, the platform operator acts as the critical intermediary between private companies, investors, and regulators, ensuring that the PISCES market functions efficiently, fairly, and transparently:
Investor Categorisation and Eligibility: Intermediaries must confirm on reasonable grounds that institutional, sophisticated, or high-net-worth investors meet the eligibility criteria defined by the PISCES sandbox regulations before placing an order to buy shares.
Promotion and Financial Communication: The FCA emphasizes clarity, prohibiting intermediaries from using incentives that could unduly influence investment decisions.
Risk Warnings and Investor Protection Measures: Mandatory risk warnings must be clearly communicated, highlighting the higher investment risks associated with trading private shares in intermittent liquidity events, even for sophisticated and high-net-worth individuals.
Monitoring for Market Manipulation and Integrity: Although UK Market Abuse Regulation (MAR) will not directly apply, intermediaries retain an indirect but crucial role. They must adhere to existing obligations to protect market integrity and prevent financial crime, being vigilant to detect and report any suspected manipulative trading practices or misleading disclosures to the PISCES platform operators and the FCA.
Appropriateness Assessments and Cooling-off Periods: While appropriateness assessments and 24-hour cooling-off periods are explicitly mandated for retail investors engaging for the first time, institutional, sophisticated, or high-net-worth investors are generally exempt, reflecting their assumed greater expertise and ability to bear risk. This exemption recognizes the distinction between professional investor groups and retail clients, aiming to streamline trading efficiency for informed participants.
Complaint Procedures and Recourse Mechanisms: Intermediaries must maintain clear complaints procedures. Institutional and sophisticated investors retain access to existing recourse mechanisms (e.g., contractual legal remedies or potentially the Financial Ombudsman in certain contexts) where breaches of regulatory or contractual obligations occur.
Monitoring and Evaluation—A Platform Operator’s Perspective
During the five-year sandbox period, platform operators will be directly responsible for capturing comprehensive data and evidence to measure their platform’s success against FCA-defined criteria. This includes systematically tracking the number and diversity of participating private companies and investors, transaction volumes, and the effectiveness of liquidity concentration during intermittent trading events. These quantitative measures will help illustrate the market’s capacity to deliver meaningful liquidity and robust price discovery.
Platform operators are also tasked with qualitative assessments to gauge participant satisfaction and regulatory compliance. They must proactively gather and analyse participant feedback on disclosure arrangements, market access, and fairness, as well as monitoring for any instances of manipulative trading or misleading information. Operators must be ready to demonstrate that their monitoring processes are both proportionate and effective, supporting market integrity without creating unnecessary barriers for participating companies and investors.
Additionally, operators are expected to actively engage with the FCA throughout the sandbox period, providing regular updates, responding promptly to queries, and adjusting their operational frameworks where necessary. Operators’ ability to quickly identify and address issues as they arise, refining their governance, compliance, and disclosure frameworks, accordingly, will be essential in ensuring they meet FCA expectations and contribute positively to the PISCES experiment.
Ultimately, market participants must leverage the sandbox period to develop robust evidence to support the transition of PISCES from a temporary regulatory innovation to a permanent feature of the UK financial landscape. This approach to continuous improvement, transparent reporting, and constructive engagement with regulatory bodies will be key in securing the FCA’s and UK Government’s support for the long-term adoption and success of the PISCES model.
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