FCA Publishes Consultation Paper Seeking to Improve the IPO Process

The Financial Conduct Authority (FCA) has published a consultation paper on the initial public offering (IPO) process. The paper is part of an initiative designed to reform the UK IPO ecosystem by improving the quality of information provided to market participants.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, called a well functioning IPO market essential to 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,” stated Woolard.

The FCA said the Prospectus, the primary source of information for an IPO, arrives very late in the process. The FCA also stated that researchers generally lack the information necessary to critique initial public offerings. Analysts within the book-running syndicate end up being the dominant source of information thus creating a crucial conflict of interest. The consultation paper includes a set of proposed rules that strive to ensure the publication of “unconnected research.” The FCA believes this will improve the quality of information and negate the intrinsic imbalance of information for investors.

The FCA wants to see an IPO process:

  • Enhanced standards of conduct during the production and distribution of connected research;
  • Where a prospectus document plays a more central role; and
  • Where the necessary conditions exist for the emergence of unconnected IPO research.

The IPO consultation is related to a wider program of work that is designed to increase the efficiency and effectiveness of primary markets. The FCA recently published a Discussion Paper on UK primary markets landscape and a Consultation Paper on technical enhancements to the Listing Rules.

Comments on the IPO consultation will be accepted until June 1, 2017.

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