The FCA has launched a consultation paper on the IPO process with the aim of increasing transparency for potential investors.
The consultation paper follows the FCA’s discussion paper, published in April 2016, which found the quality of information provided to potential investors needs improving, and the point at which it is offered should be reviewed.
For example, the regulator says a firm’s prospectus is its “primary source of information” and is made available “very late in the process”, while independent analysts often struggle to access the information they need to produce research on IPOs.
The FCA says this means investors rely on the ‘connected research’ written by analysts, which could be cause for conflict of interest if an analyst’s bank is tasked with securing a place on the book-running syndicate.
The consultation paper proposes rules stipulating a prospectus or registration document must be published by firms considering an IPO, while providers of ‘unconnected research’ can access the issuer’s management before their research is published.
It is part of a wider programme by the FCA targeting increased efficiency and effectiveness in the primary markets. Last month the FCA published a discussion paper on the UK primary markets landscape and a consultation paper on technical enhancements to the listing rules.
Christopher Woolard, executive director of strategy and competition at the FCA, says: “A well-functioning IPO market with high standards of conduct is an essential part of the UK’s capital markets. The IPO process has considerable strengths, but the proposals we have outlined in today’s consultation paper are designed to improve the range, and timeliness of higher quality information that is available to investors during the process.”