March 1, 2017 / 11:34 AM / 5 months ago

UPDATE 1-UK watchdog proposes IPO research shake-up to level playing field

3 Min Read

(Recasts with more detail)

By Huw Jones

LONDON, March 1 (Reuters) - Giving investors independent research on stock flotations earlier will help keep Britain's global financial centre competitive in the face of Brexit uncertainty, a senior UK regulator said on Wednesday.

The Financial Conduct Authority (FCA) is proposing a complete "resequencing" of when investors get a prospectus and research on a company listing.

Under existing rules, the prospectus, which gives in-depth information about the company that plans to list, is only made available late in the initial public offering process.

Analysts at banks who are not involved in the IPO also have little access to the information they need to produce research to rival that from banks "connected" to the float.

"This is of particular concern given the conflicts of interest that arise during the production of connected research, including analysts coming under pressure to produce favourable research on an offering if their bank is to secure a place on the book-running syndicate," the FCA said in a statement.

Under the proposed rules put out to public consultation on Wednesday, the prospectus would be published before the "connected" research.

Providers of independent research would also have access to the company's management before connected research is published.

The changes would make prospectuses an earlier and more central source of information for investors.

Tom Vita, an equity capital markets partner at Norton Rose Fulbright law firm, said unconnected analysts were effectively prevented from issuing research when an IPO was being marketed, but lengthening the flotation process too much would create new risks.

Britain is Europe's biggest financial centre but its decision to leave the European Union in 2019 has raised questions about whether it can maintain access to the bloc's investors in future.

Christopher Woolard, the FCA's executive director of strategy and competition, said the watchdog's proposals would help keep Britain's wholesale market clean, effective and competitive.

"In periods of uncertainty as we face together now, it is only on this basis, by meeting these tests, that the UK can continue to consider itself a global centre for the issuance of securities," Woolard told a Bloomberg event.

"We believe strong markets are firmly in the interests of UK consumers, and we will innovate and take action to ensure those markets remain open for business."

Earlier this month the FCA published separate draft rules to make the listing of foreign companies in Britain more flexible.

Wednesday's proposals are similar to a system used in France and the United States.

Woolard dismissed calls for a "light touch" regulatory approach to keep Britain competitive after Brexit, saying that strong standards and respected regulation gives people confidence in UK markets.

Company research faces further upheaval next year under new EU rules that will force banks to charge fund managers an explicit price for research on securities.

Reporting by Huw Jones; Editing by Alexander Smith and Susan Thomas

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