Lansons Conversations

The FCA launches a consultation paper on: Reforming the availability of information in the UK equity IPO process

As part of a wider programme of work that is designed to increase the efficiency and effectiveness of primary markets, the FCA has today, launched a consultation paper (Reforming the availability of information in the UK equity IPO process) proposing a package of measures to reform the availability of information during the UK IPO  (initial public offering) process, that follows its Discussion Paper, April 2016.

Within this Discussion Paper, the FCA identified that timings, sequencing and quality of information being provided to market participants during the IPO process, could be improved.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said: 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.”

In its finding, the FCA says the prospectus, is made available very late in the process and as such, analysts within non-syndicate banks and independent research providers generally lack access to the information they need to produce research on IPOs. As such, the book-running syndicate’s analyst research is the primary source of information available during the process. The FCA has particular concerns about this, given, as they see it, conflicts of interest arise during the production of connected research, including analysts seemingly coming under pressure to produce favourable research on an offering, their bank is running.

The Consultation Paper includes a series of rules which seek to ensure that a prospectus or registration document is published, and providers of ‘unconnected research’ have access to the issuer’s management, before any connected research is released. The package also includes new guidance clarifying the FCA’s expectations on analysts’ interactions with the issuer’s management and their corporate finance advisers when considering the IPO mandate and a bank’s syndicate positioning.

Ultimately, the FCA wants to see an IPO process:

-with 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.

Lansons has a wealth of experience advising clients on their corporate and capital markets communications requirements and the team has recently advised on a number of high profile IPO’s in London. If you would like to discuss any of your financial and corporate communication requirements, please contact:

Rollo Crichton-Stuart:

Tom Baldock: