The UK regulator The Financial Conduct Authority (FCA) has announced reforms to reignite retail capital markets in the UK and new rules which will make it easier for everyday investors, to access IPOs, Follow Ons and Corporate Bonds.
The FCA’s PS25/9 reforms will see “big changes” coming to UK financial services and millions of ordinary investors benefitting according to commentators with the Uk industry reacting almost overwhelmingly positively to the watchdog’s proposals.
James Deal, Co-CEO of RetailBook, called the FCA announcement a “revolutionary and groundbreaking step” to reignite Retail Capital Markets in the UK, as new rules will make it easier for everyday investors, to access IPOs, Follow Ons and Corporate Bonds.
“For years, these opportunities were reserved for big institutions,” said Deal. “But now, all investors will finally get a better shot at accessing the same deals as institutions. The changes enable companies to attract a broader pool of capital, placing the UK at the forefront of global Retail Capital Markets.
“The FCA’s paper underscores a commitment to transparency, disclosure, simplicity, and investor empowerment, while also laying critical groundwork for revitalising the UK’s primary capital markets, IPO’s, Follow on and Corporate Bonds.
“Retail investors will now be able to engage with financial markets with greater confidence and impact. This is especially important in an era where individuals are increasingly responsible for their own financial futures, from ISAs to pensions. These reforms will reduce compliance burdens for firms and foster a more competitive environment.”
Reforms
The FCA’s PS25/9 reforms will see a reduction in the six–day requirement for an IPO prospectus to be available to the public prior to an IPO, which will help firms list more quickly and efficiently and improve access for retail investors. With the widespread electronic distribution of prospectuses, the FCA has recognized the strong support given to their proposal to reduce their requirement to three working days.
The reforms will Increase to 75% issuance of existing share capital for prospectus requirements, meaning that a company is issuing more than 75% of its existing share capital, a prospectus will not be required. This is up from the previous 20% requirement and places the UK in a competitive position to European peers.
PS25/9 sets out the final rules introduced by the Public Offers and Admission to Trading Regulations (POATRs), including the removal of the legacy EUR 8m prospectus exemption for an offer to the public.
The FCA have set out a single disclosure standard for corporate bond issuance. This reduces costs for issuers and will make it easier for corporate bonds to be issued in smaller, “more investible sizes” to support retail investment.
AIC
The Association of Investment Companies (AIC) has welcomed also new FCA rules that mean investment companies will be able to raise up to 100% of their existing share capital without needing to issue a prospectus. The current limit is 20%.
The new rules were announced today in the FCA policy statement ‘New rules for the public offers and admissions to trading regime’ (PS25/9). Trading companies will have their limit for share issuance without a prospectus raised from 20% to 75%.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “We’re very pleased that the FCA has taken our feedback on board and removed an unnecessary barrier to investment companies raising more capital. Investment companies invest billions into UK-listed companies, private companies, infrastructure, renewable energy and other UK assets. Existing investment companies have raised £52bn over the past ten years. The FCA’s recognition of our sector will make it easier and more cost-effective for investment companies to raise additional capital and further support UK growth.”
Investment companies will also be able to issue C shares without issuing a prospectus provided the proceeds are invested in line with their existing policy.
