Under a proposed new regime, the U.K.’s Financial Conduct Authority (FCA) would require companies to issue a prospectus for their initial public offering (IPO) only. After that, most companies would be allowed to rely on their continuous disclosure to raise capital.
The FCA published a series of consultation papers on proposed reforms that aim to strengthen U.K. capital markets and cement the country’s position as a global financial centre.
At the heart of the proposals is the idea to establish a new Public Offers and Admissions to Trading Regime to replace its existing prospectus rules. Under that regime, a prospectus would be required when a company is first publicly listed, but follow-on offerings generally wouldn’t need a prospectus.
“Our proposals aim to reduce the costs of listing on U.K. markets, make capital raising easier on U.K. listed markets and remove barriers to retail participation. They dovetail with recent reforms we have undertaken of the listing regime… which aim to encourage companies from around the world, many of which start up and are incubated in the U.K., to list and raise capital here and to help U.K.-listed companies be more competitive globally,” the regulator said in its consultation.
At the same time, the FCA is also consulting on proposals to allow platforms to help companies raise capital outside the public markets, including from retail investors, when they are raising more than £5 million.
These proposals are intended to make it easier for smaller, earlier-stage companies to find the growth financing they need.
Additionally, the FCA confirmed new rules that allow fund managers to pay for investment research through payments that bundle together research and trade execution services — unwinding efforts that regulators made previously to separate research from trade execution in order to address potential conflicts of interest.
Now the FCA says it is allowing bundling to “give asset managers greater freedom in how they pay for investment research” and to improve competition in the market for the benefit of investors.
“The new payment option is also compatible with rules in other jurisdictions, making it easier for asset managers to buy research across borders,” it said.
Finally, the FCA issued a consultation on proposed reforms to derivatives trading obligations that aim to improve the regulation of secondary markets, reduce systemic risk and disruption to firms.
“The package we have set out today, alongside our recent reforms to the listing rules, will help to strengthen the U.K.’s position in wholesale markets. We know we need to strike the right balance between protection for investors and allowing capital markets to thrive,” said Sarah Pritchard, executive director of markets and international at the FCA, in a release.
“With that in mind, we have engaged extensively and broadly in developing the final set of rules to support a thriving investment research market. We are also setting out key reforms to the prospectus regime, and welcome engagement from the sector so that we can get the balance right before deciding the final regime,” she added.
The deadline for feedback on the proposed new approach to public listings and offering platforms is Oct. 18. The deadline for the proposals on derivatives trading obligations is Sept. 30.