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The United Kingdom’s Financial Conduct Authority (FCA) has proposed new regulations aimed at strengthening capital markets, enhancing capital-raising processes, and refining the regulation of secondary markets. Additionally, the FCA has finalized new rules concerning investment research. These initiatives are designed to bolster the UK’s status as a leading global financial hub, according to a press release issued on Friday (July 26).
“The package we have set out today, alongside our recent reforms to the listing rules, will help to strengthen the UK’s position in wholesale markets,” said Sarah Pritchard, executive director of markets and international at the FCA. “We know we need to strike the right balance between protection for investors and allowing capital markets to thrive.”
One of the FCA’s key proposals would allow companies to raise additional capital without the need to publish a prospectus, except in specific circumstances. However, a prospectus would still be required when securities are first admitted to public markets. This change aims to reduce costs for companies raising further capital while ensuring that investors receive necessary information.
The regulator has also proposed a new mechanism for companies to raise capital outside of public markets, including from retail investors. This initiative is expected to simplify the process for small companies seeking scale-up capital.
Another significant proposal focuses on derivatives trading obligations. The goal is to improve the regulation of secondary markets, lower systemic risk, and reduce disruptions for firms.
The FCA also announced final rules permitting asset managers to “bundle” payments for investment research and trade execution. These rules are intended to enhance market competition and facilitate cross-border research purchases for asset managers.
“Putting the right information in the hands of investors and removing unnecessary costs will help further bolster the market,” Pritchard added.
Despite these measures, there have been reports indicating that tech companies are hesitant to launch their initial public offerings (IPOs) in the UK. Venture capitalists have cited concerns that institutional investors in London prioritize dividend-yielding stocks over high-growth opportunities. Additionally, there is a perception that these investors lack understanding of the tech sector, contributing to a challenging market environment, as reported by CNBC in May 2023.
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