In our 9 page response we said:
We welcome this consultation paper CP21/21.
ShareSoc is a not-for-profit organisation with over 8,000 members. We represent the interests of 5 million individual shareholders and 12 million individual investors in the UK. We are members of Better Finance who, together with our sister organisations in other countries represent individual investors throughout Europe. We are also members of the World Federation of Investors. ShareSoc Chair, Mark Northway, is also Chair of the World Federation of Investors.
Our members are most interested in:
- Liquidity, spreads, costs, hidden costs, front running, pump and dump, pump and place, and other failures to disclose promptly
- Misleading RNS, including trading statements and director independence and related party issues and activity
- Removal of the €8 million limit in placings
- Fair treatment of retail in placings and IPOs
- Burdensome documents for rights issue, which will result in the loss of pre-emption rights as companies private prefer placings.
- Mates rates placings which are not open to all investors on fair and similar terms.
- Low valuations of the companies in the UK market compare to the US markets
- Many members are now using the US markets as they are more liquid with lower splits, cheaper and are better regulated
- Fewer Carillions, Thomas Cook, Cake (Patisserie Valerie), Conviviality, etc.
We think these points are all part of the wider context and need to be also addressed as a priority.
We think the FCA should regulate AIM, rather than the LSE regulating that market.
In our opinion, the LSE is conflicted in that it has a business interest in encouraging as many AIM listings as possible which conflicts with the requirement to vet the legitimacy of companies that list and the probity of their boards. We are also concerned about hot potatoes currently being passed between the FCA and LSE and things falling in between the cracks.
The proposed changes by your review and that of HM Treasury to the Prospectus Regime look sound.
However, we have concerns about the context in which they (and probably other changes) are taking place. Post Brexit we have a huge opportunity to develop a clear strategy for the UK finance industry. The Prospectus regime is an important part of the bigger picture. We would like to see greater clarity on the bigger picture and a wider review and overhaul of the way that UK markets and the UK Financial Services industry works is needed. Clearly, that is going to be a long-term endeavour which will take years. But the starting point has to be some sort of plan and strategy.
In relation to questions 1 to 11, please note we prefer Model 4. A key point is that information should be available at the point of sale and purchase of shares of which Type of company and on which market the share is listed and which is its main market index. This information should also be clearly displayed in key documents such as annual reports, RNS, circulars, etc.
The FRC is proposing a Sox-lite version of disclosure of information which we support: we believe this is greatly needed. We wish the UK Premium Listing to remain very much as a Premium listing and are concerned about any reduction of standards. We would not like to see a race to the bottom as different stock markets seek to attract new companies to list on their exchanges.
We strongly disagree with the first negative bullet in the table on page 23, in respect of Model 4 “May be difficult for issuers to understand the purpose of different segments”. Apart from being patronising, issuers where necessary have advisers to explain the markets and the alternatives and guide them. It is also the role of the FCA to propose segments that make sense and have clear purposes.
We also question – might the symptoms suggest a wider problem relating to the complexity of the market segments, which might be something the FCA should research with a view to prescribing a cure, if the facts deem it necessary?
The full consultation can be read here https://www.fca.org.uk/publication/consultation/cp21-21.pdf
Our full response can be read here FCA Consultation Paper CP2121 Primary Markets Effectiveness Review – Final response