FCA plots regulatory bonfire to lower costs of raising capital
The Financial Conduct Authority is to pare back its onerous capital raising rules as part of a regulatory bonfire aimed at helping firms grow faster.
Under fresh rules set to take effect in January, the requirement to produce a prospectus for public secondary share raises will be upped from 20 per cent to 75 per cent of existing share capital, a move which will do away with pricey legal and advisory fees and cut costs for firms fundraising by as much as £40m a year.
Data seen by the FCA showed capital raises had clustered at or near the 20 per cent threshold in signs steep disclosure requirements were frustrating efforts to raise more money.
Officials said the reforms were “at the boldest end” of proposals it had consulted on, adding it was “shifting the balance” away from being risk-averse in a nod to the government’s call for regulators to adopt a pro-growth approach.
Simon Walls, executive director of markets at the FCA, said: “These bold shifts promote innovation, lower costs, and enable a broader investor base for growing businesses.”
Retail investors brought into the fold
The FCA will also simplify access to capital markets for retail investors, by cutting the number of days to come to market for IPOs that include the public and creating a new single disclosure standard for corporate bond prospectuses, making it easier for bonds to be issued in smaller, more investible sizes.
The financial watchdog has set up a new platform for public offers to make it easier for growth companies to get investment, allowing them to make larger offers of shares or bonds without a lengthy prospectus.
Anand Sambasivan, CEO of capital markets platform PrimaryBid, said: “This is what progress looks like: cheaper fundraising for companies, better access for retail investors, and a fairer market overall. A UK capital market that includes the public again.”
The reforms come ahead of Chancellor Rachel Reeves’ annual Mansion House address tonight, at which she is expected to unveil more cuts to red tape to help businesses grow and attract more overseas investors.