The FCA is to go ahead with moves to encourage more retail investment in companies' capital raising by cutting red tape.

As part of its 'growth agenda' the watchdog will streamline rules to make it easier for companies to raise the money they need to expand in a move to support the UK’s capital markets. 

According to the regulator, the changes will cut capital raising costs for companies and provide wider access to 'investment opportunities' for consumers.  

The reforms include the green light for plans to reduce the cost of launching corporate bonds to make it easier to issue "smaller, more investible" sizes and "support retail investment."

The package means:  

• Companies that are already listed will not need to publish lengthy prospectuses to issue more shares "in most cases."   

• The length of time between a prospectus being issued and an initial public offering (IPO) is being cut in half enabling companies to list more quickly on the Stock Exchange.  

• Companies will be able to issue corporate bonds to retail investors "more easily" and a new public offer platform will help smaller growth companies raise cash to scale up. 

Among the detailed reforms planned:

Prospectus reform 

Companies will not be required to publish a prospectus when raising further capital, except in limited circumstances. The threshold for when a prospectus is required for a listed company to raise more shares has increased to 75% of existing share capital, up from its current 20% level. This will reduce costs for UK companies seeking new funds by an estimated £40 million per year, unlocking more capital for growth and investment. IPOs that include the wider public can come to market 3 days after the publication of their prospectus, replacing the previous 6-day window and removing barriers to retail access. 

Corporate Bonds 

The FCA has set out a single disclosure standard for corporate bond prospectuses, covering both large and small bonds. This will reduces costs for companies, the FCA says, and will make it easier for corporate bonds to be issued in smaller, more investible sizes and support retail investment. Corporate bonds offer a valuable investment opportunity for retail investors, the FCA says, and can provide later life income, helping people navigate their financial lives. 

Public Offer Platforms (POPs) 

The regulator has set up a new platform for public offers to make it easier for growth companies to get the investment they need and increase opportunities for investors. It will enable companies to make larger offers of shares or bonds without a lengthy prospectus, above £5 million. Offers will be made available to a broad investor base outside of public markets via an authorised firm. This will work similarly to crowdfunding platforms but for larger deals, according to the FCA.  

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. 

“Our capital markets are world leading. They’re our economic engine and we want to keep them roaring in support of sustained growth and prosperity for the whole country.” 

Susannah Streeter, head of money and markets at major platform Hargreaves Lansdown, said: "London has struggled to compete with super-star valuations on Wall Street and has been facing an exodus of listed firms leaving for pastures new. The City needs a leg-up and the Financial Conduct Authority is attempting to provide support by making it cheaper and easier for companies to raise funding in London. Companies have long bemoaned the difficulties of raising money in a tangle of red tape, which this shake up is designed to cut through.

"These changes in prospectus rules should encourage more companies to raise money on the London market and make the UK more attractive place to list. In addition, it will result in more capital raisings being open to retail investors. At Hargreaves Lansdown we know there’s huge demand for participation from long term retail investors but all too often they’ve be cut out.  These new rules present a sea change from the regulator, its now time for the funding pipeline to do their bit, opening up more offers to retail investors."

• The FCA previously consulted on the proposals for prospectus reform and POPs. 

• The FCA previously consulted on the proposals to make it easier for listed companies to issue lower denomination corporate bonds.