Investment companies will be able to issue up to 100% of their share capital without issuing a prospectus, the Financial Conduct Authority says.
The investment companies sector caught a rare break from the City regulator today when the Financial Conduct Authority announced that London-listed closed-end funds could raise up to 100% of their existing share capital without issuing a prospectus.
While the concession may feel academic in a depressed sector trading at a 13% discount, preventing share issuance for all but a handful of the 300 investment companies, the fact that the threshold is higher than the 75% for listed trading companies was welcome.
The current level is 20% with the FCA reckoning the move would save around £40m costs in preparing long, unwieldy documents full of technical language that few investors read.
Investment companies will also be able to issue C-shares without issuing a prospectus provided the money raised is invested in line with their existing policy.
The length of time between a prospectus being issued and an initial public offering (IPO) has been halved to three days, meaning companies could list more quickly on the stock exchange.
QuotedData’s James Carthew said:
“I think the FCA is waking up to the idea that if the trusts all disappear, there won’t be much left of the London Stock Exchange.”
Richard Stone, chief executive of the Association of Investment Companies, which has been pushing the FCA and government to devise new cost disclosure rules that don’t penalise the sector, was pleased.
“Existing investment companies have raised £52bn over the past ten years. The FCA’s recognition of our sector will make it easier and more cost-effective for investment companies to raise additional capital and further support UK growth,” he said.
Other measures will make it easier for companies to issue corporate bonds to private investors while a new rules for public offer platforms and crowdfunding websites should help smaller companies raise growth capital of up to £5m.
Simon Walls, executive director of markets at the FCA, said: “These bold shifts promote innovation, lower costs, and enable a broader investor base for growing businesses. They are the latest in a programme of reforms shifting the balance from pre-emptive checks to market disclosures.”
The announcement came as part of a package of “Leeds Reforms” ahead of the first annual Mansion House speech by the chancellor Rachel Reeves in which she vowed to “regulate for growth”. Other initiatives will see banks and fund managers lead a “Tell Sid” style advertising campaign to promote investment by savers. Meanwhile, risk warnings on investments will be reviewed and likely softened and the Financial Ombudsman Service will have its powers curbed with a 10-year limit on claims and a cut in the interest rate applied to compensation.
