New Financial Conduct Authority (FCA) regulations aimed at increasing retail participation in primary capital markets have come into force.

The Public Offers and Admissions to Trading Regulations (POATR) have replaced the Prospectus Regulation, aiming to make it easier for companies to raise capital when admitting securities to UK public markets, provide better access to share placings, and give wider access to initial public offerings (IPO) and corporate bonds.

Companies on the stock market can now raise up to 75 per cent of their existing share capital without having to publish a prospectus, and the cap for retail investor involvement has been removed.

Additionally, the minimum IPO offer period for retail investors has been reduced to three days, while regulations around corporate bond investment have been relaxed to encourage retail participation.

The FCA also announced that the framework for the Public Offer Platform (POP) regime has come into force.

Firms are able to use the authorisation gateway to apply to become authorised as POP operators, with the FCA urging authorised and non-authorised firms intending to apply for the POP activities to use the pre-application support service (PASS).

The FCA said the POP regime would enable smaller and scaling companies to raise capital by offering securities outside a public market to a broader investor base, including retail investors.

“Retail investors should find it easier to take part in company fundraisings, stock market flotations, and corporate bond offers under [the] new rules,” said AJ Bell head of markets, Dan Coatsworth.

“The new rules could encourage more companies to raise money on capital markets to support their growth plans.

“Easier access to fundraisings could also help to broaden companies’ shareholder base and be a stepping stone for retail investors to become more active with their ISA and pension portfolios.”

Hargreaves Lansdown chief investment strategist, Emma Wall, added: “This progress highlights a clear shift from industry to include retail investors in more issuances, and a trend we’d like to see extend as regulations on capital raises continue to open up opportunities for retail access.

“By fostering a retail investment culture and making UK markets a more attractive place for listings, we can pave the way for a more dynamic and equitable financial ecosystem.
“With continued collaboration among issuers and advisers we can further amplify these gains, driving growth, innovation, and prosperity for the UK economy as a whole.”

Investment firms, including AJ Bell and Hargreaves Lansdown, have written an open letter to Chancellor, Rachel Reeves.

They urged the industry to show its commitment to the changes by normalising ‘retail inclusive’ IPOs and plain vanilla listed bonds, adopting the PEG ‘Retail Standard’ which supports a retail follow-on offer of up to 20 per cent of any institutional placing, and normalising the inclusion of a retail tranche on all follow-on raises.

The firms also asked the New Listings Taskforce, in conjunction with the regulator, to ensure ongoing transparency and spearhead a joint statement of support to standardise all forms of retail inclusion practices across all forms of public issuance.

---