The Financial Conduct Authority (FCA) has been lauded for proposing to facilitate direct access to bond markets for retail investors in its latest engagement paper.
The paper, published on Thursday (18 May), focuses entirely on non-equity securities and considers how to make the debt programme more efficient, proposing an end to the differing disclosure requirements for wholesale and retail fixed-income investments.
The paper said the effect of the dual standard of disclosure, which allows for reduced disclosure standards for issuances above $100,000 (£80,000), has been to create an incentive to issue high-denomination securities to avoid disclosure obligations, instead of the intended effect of offering increased consumer protection to retail investors.
The regulator added that this has led to a bifurcation of the market, between retail and wholesale, and argued that removing the rule would assist retail investor access.
Stacey Parsons, head of fixed-income strategy at Winterflood Securities, said the proposals were a “beam of light” from the FCA, arguing that “true financial inclusion needs to extend to all asset classes for investors”.
Approximately 89% of securities included in the FCA’s Official List are non-equity securities.
Parsons added: “The regulation may well turn out to be the easy part in all this, changes to process will also be required by stakeholders in the debt capital markets ecosystem to achieve better access for all investors.
“However, capital markets can and do adapt and we welcome the FCA offering a legitimate pathway of change. What is needed now is debt capital markets to function with everyone in mind – both wholesale and retail, where it is feasible.”
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