UK’s FCA Announces Proposals, Rules to Strengthen Capital Markets

The United Kingdom’s Financial Conduct Authority (FCA) proposed new rules on publishing a prospectus, raising capital and regulating secondary markets, and finalized new rules on investment research.

These rules aim to strengthen the U.K.’s capital markets and its position as a global financial center, the regulator said in a Friday (July 26) press release.

“The package we have set out today, alongside our recent reforms to the listing rules, will help to strengthen the U.K.’s position in wholesale markets,” Sarah Pritchard, executive director of markets and international at the FCA, said in the release. “We know we need to strike the right balance between protection for investors and allowing capital markets to thrive.”

One of the FCA’s proposals will allow companies to raise further capital without having to publish a prospectus, except in limited circumstances, while still requiring them to publish a prospectus when first admitting securities to public markets, according to the release.

This proposed change is meant to reduce the cost of further capital raises for companies, while making sure investors get the information they need, the release said.

The regulator has also proposed a new way for companies to raise capital outside of public markets, including from retail investors, saying that this should make it easier for small companies to raise scale-up capital.

A third proposal involves derivatives trading obligations and aims to improve the regulation of secondary markets, lower systemic risk and reduce disruption to firms, per the release.

The FCA also announced final rules that allow asset managers to “bundle” payments for investment research and trade execution. The regulator said these new rules aim to improve competition in the market and make it easier for asset managers to buy research across borders.

“Putting the right information in the hands of investors and removing unnecessary costs will help further bolster the market,” Pritchard said in the release.

It has been reported that tech companies determined that the U.K. is not the place to launch their initial public offerings (IPOs).

Venture capitalists said that institutional investors in London look for stocks that will yield dividends rather than high growth, that the investors don’t understand the tech sector and that the market is known to be “very problematic,” CNBC reported in May 2023.