REGULATOR SETS OUT NEW RULES TO BOOST UK CAPITAL MARKETS

The UK’s financial regulator has proposed new rules aimed at making it cheaper and easier for companies to raise money, the latest in an ongoing programme of reform intended to boost Britain’s capital markets.

The proposals announced on Friday by the Financial Conduct Authority included lifting the threshold at which companies need to issue prospectuses for secondary fundraisings from 20 per cent of their issued share capital to 75 per cent.

“This is a huge change,” said Jamie Corner, partner at Simmons and Simmons. “You can do far more secondary issues of shares if you don’t need to produce a prospectus.”

He added the change would allow companies to act more quickly: “It takes easily a month and a half out of the process.”

The proposed changes come as the UK is in the midst of reassessing key capital markets rules in an effort to attract and expand new companies and encourage them to raise money at home.

London has struggled to compete with New York for listings and investment into high-growth businesses, and earlier this month approved the biggest overhaul of its IPO rules in three decades.

The UK’s new listing rules gave company founders more power such as by allowing dual class share structures and the ability to make more decisions without shareholder votes.

Despite the lack of IPOs, follow-on transactions in the UK have boomed so far this year. Follow-on transactions are when companies raise money after IPOs, either by investors offloading chunks of their stock or the company issuing new shares.

Richard Stone, chief executive of the Association of Investment Companies, welcomed the latest changes, adding they would cut the costs of making prospectuses, something which has been “particularly punitive for small issuers while adding nothing of value to investors”.

But Corner warned that some investors would dislike how high the threshold had been set, noting it would result in less disclosure for larger share sales.

If the proposal is agreed, the UK would diverge sharply with EU rules. European Union officials, who recently refreshed the bloc’s listing rules, lifted the threshold for issuing a prospectus from 20 per cent of issued shares to 30 per cent.

“The UK is diverging significantly from Europe and becoming far more company-friendly,” Corner added.

The FCA said: “These proposals will make sure investors get the information they need while significantly reducing the costs associated with further capital raises for companies.” 

The regulator is also consulting on new rules for “public offer platforms”, such as crowdfunding companies that help start-ups raise money from investors including retail.

2024-07-26T12:29:20Z dg43tfdfdgfd