The FCA is to consult on ground-breaking proposals to launch capital-raising retail platforms to raise money for expanding firms.

The platforms would effectively be a ‘new regulated activity,’ if confirmed, the watchdog said.

The move could open the door to retail investors taking part in fund-raising drives for companies via a retail platform.

'Public offer platforms' would allow an alternative route for companies to raise capital outside public markets, including from retail investors.

The proposals - in CP24/13: New regime for public offer platforms - is part of a major shake up in capital markets which will also see asset managers given more freedom in how they pay for investment research.

The FCA said today: “We are consulting on rules to support the new regulated activity of operating a public offer platform.

“Firms operating a public offer platform will allow companies to raise capital by offering securities outside a public market to a broad investor base, including retail consumers.”

The FCA said it wants to promote efficient and effective capital raising for companies seeking to scale up and grow their businesses.

The Financial Conduct Authority announced the proposal today as part of a a package of measures it says will “strengthen the UK’s capital markets.”

It wants to boost public offers and make it easier to access UK markets to restore London’s position as “a global and vibrant financial centre,” it said.

According to the regulator, the introduction of the platforms should promote scale-up capital raising for smaller companies while ensuring that investors get the right disclosures on the key terms and risks of an investment.

Among the key changes are:

• Proposed rules to establish the new Public Offers and Admissions to Trading Regime (POATRs), which will replace the existing UK Prospectus Regulation.  

• Companies will still be required to publish a prospectus when first admitting securities to public markets but a prospectus would not be required when a company raises further capital, except in limited circumstances. 

• Together with other existing disclosure obligations, the proposals should significantly reduce the costs associated with further capital raises for companies, the FCA said

The FCA has also confirmed new rules that give asset managers greater freedom in how they pay for investment research, by allowing the ‘bundling’ of payments for research and trade execution.

These new rules aim to improve competition in the market for the benefit of investors, the FCA said. The new payment option is also compatible with rules in other jurisdictions, making it easier for asset managers to buy research across borders.  

The final part of the package is a consultation outlining proposals for the derivatives trading obligations to help improve the regulation of secondary markets, reduce systemic risk and disruption to firms. 

Sarah Pritchard, executive director, markets and international at the FCA said: “The package we have set out today, alongside our recent reforms to the listing rules, will help to strengthen the UK’s position in wholesale markets. We know we need to strike the right balance between protection for investors and allowing capital markets to thrive.  

“With that in mind, we have engaged extensively and broadly in developing the final set of rules to support a thriving investment research market. We are also setting out key reforms to the prospectus regime, and welcome engagement from the sector so that we can get the balance right before deciding the final regime. Putting the right information in the hands of investors and removing unnecessary costs will help further bolster the market.” 

• CP24/13 can be viewed here