FCA presents plan to strengthen UK capital markets

Proposals for new public offers and admissions to the trading regime

Key to the package are proposed rules to introduce the new Public Offers and Admissions to Trading Regime (POATRs), which will replace the existing UK Prospectus Regulation.

Under the proposals, companies will still be required to publish a prospectus when listing securities on public markets for the first time. However, a prospectus would not be required when a company raises additional capital, except in certain circumstances.

Together with other existing disclosure requirements, these proposals will ensure investors receive the information they need, while significantly reducing the cost of further capital raising for companies.

The FCA is also advising on proposals for a new activity, namely the operation of a public offering platform. These platforms offer companies an alternative way to raise capital outside of public markets, including from private investors. The launch of the platforms is intended to promote capital raising for smaller companies while ensuring that investors receive the correct information on the key terms and risks of an investment.

Final rules on the new payment option for investment research

The FCA has also confirmed new rules that will give asset managers more freedom to pay for investment research by allowing payments for research and trade execution 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 purchase research across borders.

The FCA has been heavily involved in the development of these rules. After careful consideration of the responses to the consultation, significant changes have been made to the conditions linked to the use of the new payment option. The FCA wants to ensure that it is operationally efficient and adaptable to different types of businesses, but also ensures that it ensures an appropriate level of protection for consumers and that there is no return to historically poor practice in this area.

The final part of the package is a consultation setting out proposals for derivatives trading obligations to improve regulation of secondary markets, reduce systemic risk and disruption to businesses.

Sarah Pritchard, managing director of markets and international at the FCA, said: “The package we have unveiled today, together with our recent reforms to listing rules, will help strengthen the UK’s position in wholesale markets.” We know that we must find the right balance between protecting investors and allowing capital markets to thrive.

“With this in mind, we have engaged fully and comprehensively in developing the final rules to support a thriving investment research market. We are also putting forward important reforms to the prospectus regime and welcome the sector’s engagement to help us strike the right balance before deciding on the final regime.

“Providing investors with the right information and avoiding unnecessary costs will help further strengthen the market.”