The U.K.’s Financial Conduct Authority (FCA) says that reforms it introduced in 2018 to help generate more independent research coverage for companies going public for the first time haven’t met that objective, but have added cost and complexity. Now, it’s proposing to repeal those rules.
In a new consultation paper, the FCA is seeking feedback on its proposal to scrap a failed reform effort, which was adopted to improve the quality and availability of independent research during the IPO process, and to counter the conflicts of interest that arise with research produced by dealers that are part of an underwriting syndicate.
Specifically, it’s now proposing to remove the requirement that the publication of research from firms that are underwriting an initial public offering (IPO) must be delayed for seven days. It’s also proposing to drop a requirement that investment dealers provide independent analysts with the same information that their own analysts have.
The proposals follow the regulator’s admission that an initiative that was intended to encourage independent IPO research have not worked.
Moreover, the requirements have “added complexity, risk and cost to the IPO process,” it said — which has put the U.K. markets at a competitive disadvantage compared to alternative international listing venues.
The FCA says it’s now seeking to remove these requirements to reduce needless costs and risks from the IPO process for both issuers and investment dealers, and to encourage new listings.
“Market feedback has been clear that these rules can introduce additional risk, cost and complexity without delivering the intended benefits,” said Jon Relleen, director of infrastructure & exchanges, supervision, policy & competition division at the FCA, in a release. We are committed to reducing friction, supporting growth and ensuring the U.K. remains a competitive and trusted place for companies to raise capital.”
The proposals come in the wake of reforms to the listing rules that were introduced earlier this year, in an effort to rejuvenate new listing activity, which included measures designed to enhance the information provided to investors by allowing for forward-looking statements in issuers’ prospectuses.
The proposal is open for consultation until May 29.