The UK Financial Conduct Authority (FCA) has closed on a consultation that discusses changes to public offers and admissions to trading in the UK. Policymakers are looking to improve securities markets in the UK – both public and private. Any updates aim to support capital formation and access to opportunities for investors.
The proposal incorporated in the consultation includes:
- Aligning prospectus requirements for non-equity securities to a single standard, which is based on the current disclosure requirements for ‘wholesale’ denominations, rather than having separate standards for lower denomination bonds
- Propose new guidance that defines which certain (non-complex) low denomination corporate bonds issued by listed companies can be appropriate for the ‘mass market’ • Changes to the listings applications process for further issuances to reduce frictions and support our proposals from CP24/12 to reduce regulatory intervention in such transactions
- Proposals to remove Listing Particulars as a listing admission document to simplify our listing framework and better align with the POATRs reforms, and • Consequential changes to our Handbook, including transitional provisions, providing for and improving on rules proposed in CP 24/12
CP 24/12 was completed in 2024. This consultation focused on public offers and admission to trading.
Addressing one aspect of the consultation, Winterflood advocated for retail access to the bond market.
While all investments hold an element of risk, bonds are typically lower risk than equity and priced according to the determined level of risk. While other jurisdictions allow retail investors to participate in the market, the UK has evolved into a market that dissuades retail participation.
Michael Smith, Head of Debt Capital Markets at Winterflood, shared that their response to the FCA Consultation supported retail inclusion in the bond market. Smith said they have been advocating for this issue for many years.
“[We] believe that these reforms, if implemented correctly, will play a crucial role in opening high-quality corporate bonds to retail investors, allowing them more access to investment opportunities that have been out of reach. Overall, we are positive on the proposals. The simplification of disclosure requirements for low-denomination bonds will remove unnecessary barriers and align requirements with higher-denomination bonds, effectively ‘levelling the playing field’ for all investors, from institutional to retail,” said Smith. ” In our response, we have highlighted the importance of ensuring that the proposals work for retail inclusion from a practical perspective, and outline our thoughts on how retail investors could participate in the existing, well established, bookbuild process. We also highlight that there may be unintended consequences in categorising bonds from certain issuers as ‘non-complex’ which may lead to other types of bonds being seen as ‘complex’ in nature.”
Smith said they see the consultation as a further step towards the democratisation of investing opportunities, “allowing retail investors the same access to investments as institutional investors and creating a more equitable UK financial market.”