The Financial Conduct Authority (FCA) has announced measures to overhaul capital raising rules as part of a drive to strengthen UK capital markets.
The proposed rule changes will see the introduction of the Public Offers and Admissions to Trading Regime, replacing the existing prospectus regime.
While companies will still be required to publish a prospectus when first floating securities to public markets, the document will no longer be required for further capital raising, unless it amounts to 75% of existing shares.
The regulator has also launched a consultation on proposals for operating a public offer platform, which will aim to provide alternative routes to raising capital outside of public markets. The FCA said the proposal should promote scale-up capital raising for smaller companies.
The announcement follows on from the revamping of the UK’s listings regime, which will come into effect on 29 July.
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Rules for investment research
Meanwhile, the regulator has also confirmed new rules on payment options for investment research.
The rules allow the ‘bundling’ of payments for investment research, aimed at improving competition in the space and aligning rules with other markets.
Sarah Pritchard, executive director of markets and international at the FCA said the changes will help to strengthen the UK’s position in wholesale markets.
“We know we need to strike the right balance between protection for investors and allowing capital markets to thrive,” she said.
“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.
“Putting the right information in the hands of investors and removing unnecessary costs will help further bolster the market.”
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Reacting to the announcement, Richard Stone, CEO of the Association of Investment Companies (AIC), said the rules are a “victory for common sense” and 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.
“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.”
David Robinson, partner at law firm Fladgate, added:“ The FCA’s proposals will be welcomed, particularly by smaller-cap issuers for whom the costs of producing a prospectus are often disproportionate.
“The proposal to increase the threshold for triggering a prospectus from 20% to 75% of existing share capital and the use of a public offer platform should allow companies to raise funds more easily, more cost effectively and from a wider investor base. When combined with the imminent changes to the listing regime, the proposals should make UK listings more competitive.”
