Investors in stock market listings in Britain will get access to independent research on companies preparing to list much sooner under final rules published by the Financial Conduct Authority on Thursday. The watchdog said the changes will ensure that Britain's wholesale financial market, which will be outside the European Union from March 2019, remains "efficient and effective".
The final rules make no significant changes to draft proposals the watchdog made in March on research linked to initial public offerings (IPO). "There was broad consensus... that we should proceed with a package of measures aimed at restoring the centrality of the prospectus in the IPO process," the FCA said in a statement.
Under the new regime, analysts who are not from banks helping a company to list will get access to a company's management team before analysts at banks "connected" to the flotation can publish their own research. It has been difficult for investors to get access to independent research on companies planning to list, leading to complaints that the process is too opaque.
The aim is to make a company's prospectus, a document regulated by the FCA, the main source of investor information on a float by publishing it earlier in the IPO process and avoid reliance on "connected" research. The changes imply that publication of independent analyst research will help to price shares more "fairly", Nicholas Holmes, an equity capital markets partner at law firm Ashurst, said.
Holmes said the changes would not increase the overall timetable for a listing, but he also said: "It is at least questionable as to whether the proposed changes will lead in practice to a substantial increase in the volume or quality of independent research." John Lane, a partner at Linklaters law firm, said the London market will quickly adapt to the significant restrictions imposed by the changes.
The rules will come into effect in July 2018. The FCA said it would look further into the "relative positioning" of the existing standard listing for companies, which complies with EU minimum rules, and the UK's premium listing where companies also apply corporate governance codes.
"Whilst the premium listing regime has broad support, we have had feedback that the standard listing is less well understood and is thought to be less attractive," the FCA said. The watchdog said market participants said an "important cohort" of international issuers were seeking a listing elsewhere, raising questions about the "underlying rationale" of the standard listing.
The watchdog ruled out having an "international" listings segment as this had little support from respondents to its consultation. "We do not intend to do further work on an international segment at this time," the FCA said. "We will give further thought to options for raising requirements in the standard list."
The watchdog is already coming under fire from lawmakers for separate proposals that would relax rules on listing state companies as London seeks to attract the IPO of oil company Saudi Aramco. It has yet to publish final rules on this. The regulator will also look at provision of "patient" capital for companies that require long-term investment, and at retail access to debt markets. Market participants have argued that greater retail participation would increase funding for companies, but few companies issue debt in sizes accessible to small investors.
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