The UK’s financial regulator the Financial Conduct Authority (FCA) has announced that it will set out new rules and proposals for the establishment of wholesale markets in the UK. The FCA said it has set out a package of measures designed to help strengthen the UK’s capital markets and its position as a global and vibrant financial centre.
Proposals for new public offerings and listed listings
Key to the package are proposed rules to establish the new Public Offers and Acceptances in Transactions (POATRs) regime, which will replace the existing UK Prospectus Regulation.
Under the proposals, companies will still be required to publish a prospectus when they first list securities on public markets. However, a prospectus is not required when a company raises further capital except in limited circumstances.
Together with other existing disclosure obligations, these proposals will ensure that investors receive the information they need, while significantly reducing the costs associated with further capital raising for companies.
The FCA is also consulting on proposals for a new public offering platform operating activity. These platforms will provide an alternative route for companies to raise capital outside the public markets, including retail investors. The introduction of the platforms should promote capital raising for smaller companies while ensuring that investors receive the correct disclosures about the key terms and risks of an investment.
Final rules regarding the new payment option for investment research
The FCA also confirmed new rules that give asset managers more freedom in how they pay for investment research, allowing research and trade execution payments to be ‘bundled’. These new rules aim 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.
The FCA said it has engaged extensively as part of the development of these rules. After careful consideration of the responses to the consultation, significant changes have been made to the terms associated with using the new payment option. The FCA wants to make sure that it is operationally efficient to use and adaptable to different types of companies, but also to ensure that there is an appropriate degree of protection for consumers and that there is no return to historical bad practice in this area.
The final part of the package is a consultation outlining proposals for derivatives trading obligations that will help improve the regulation of secondary markets, reduce systemic risk and disruption to businesses.
Sarah Pritchard, executive director of markets and international at FCA said:
“The package we have unveiled today, together with our recent reforms to the listing rules, will help strengthen the UK’s position in the wholesale markets. We know we need to strike the right balance between protecting investors and allowing capital markets to thrive.
“With this 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 industry engagement so we can achieve balance before deciding on the final regime.
“Putting the right information in the hands of investors and removing unnecessary costs will help to further strengthen the market.”
FCA paper on it new regime for public offering platforms can be found here.
FCA’s paper on ability to pay for investment research can be found here.