FCA proposes IPO information reforms

Currently, independent analysts often don’t have access to the information they need to produce research on IPOs, the regulator notes. Instead, research from analysts that are connected to a company’s underwriters is the “dominant source of information available to investors” during the process, the FCA says in a statement.

“This is of particular concern given the conflicts of interest that arise during the production of connected research, including analysts coming under pressure to produce favourable research on an offering if their bank is to secure a place on the book-running syndicate,” the FCA statement adds.

As a result, the U.K. regulator proposes measures to ensure that providers of independent research have access to an issuer’s management, before any “connected” research is released. It also provides new guidance regarding analysts’ interactions with management and their corporate finance advisers.

Ultimately, the FCA says that it wants to see an IPO process that allows for: the production of independent research coverage; enhanced conduct standards during the production and distribution of connected research; and a more central role for the prospectus.

“A well-functioning IPO market with high standards of conduct is an essential part of the UK’s capital markets. The IPO process has considerable strengths, but the proposals we have outlined in today’s consultation paper are designed to improve the range, and timeliness of higher quality information that is available to investors during the process,” says Christopher Woolard, executive director of strategy and competition at the FCA, in a statement.

This consultation is part of a broader effort to increase the efficiency and effectiveness of primary securities markets.