FCA shakes up prospectus regime in bid to revive beleaguered capital markets
The Financial Conduct Authority (FCA) has laid out a shake-up of the UK’s prospectus regime today as part of a sweeping package of reforms designed to boost the country’s capital markets.
In proposals outlined this morning, the City regulator said it will look to slash the amount of paperwork listed companies are required to produce when raising money, in a long-awaited overhaul of the rules around London’s public markets.
Hefty prospectus documents have been seen as a key friction point for companies listed on the London Stock Exchange. Under the plans, such documents will no longer be required for secondary share sales unless they amounts to 75 per cent of their existing shares, up from a previous threshold of 20 per cent.
Alongside the plans, the practice of ‘bundling’ payments for research and trade execution will also be reintroduced in a bid to give asset managers “greater freedom” in how they pay for investment research. Blocking the practice has been blamed in part for the decimation of research on UK listed companies over the past decade.
The sweeping package of changes form part of the latest effort from regulators to revive the UK’s under-fire stock market, which has seen a drop off in listings over the past two years.
The FCA has come under fire from some in the City for warding firms away from the UK with burdensome rules. After the British chipmaker Arm snubbed London for New York last year, the FCA hurried out a package of listing rule changes which will come into force next week.
“The package we have set out today, alongside our recent reforms to the listing rules, will help to strengthen the UK’s position in wholesale markets,” said Sarah Pritchard, executive director, markets and international at the FCA. “We know we need to strike the right balance between protection for investors and allowing capital markets to thrive.”
A new type of public offer platform is also being consulted on to offer firms “an alternative route for companies to raise capital outside public markets”, in a nod to the new hybrid private-public market under development by the London Stock Exchange.
The prospectus plans were welcomed by the industry today. Richard Stone, boss of the Association of Investment Companies (AIC), described the changes as “a victory for common sense” that “will help the UK capital markets get back on their feet again”.
“The proposed changes will empower investment companies to raise capital more easily, removing the cost and burden of producing a prospectus where the company’s shares are already traded,” he added. “We have been arguing for years that the obligation to issue a prospectus for existing companies is an obstacle to growth and particularly punitive for small issuers, while adding nothing of value to investors.”
A consultation on the prospectus plans will now run until 18th October.