Initial Public Offerings: changes coming down the track

New rules in the Financial Conduct Authority’s (FCA) Conduct of Business Sourcebook (COBS) take effect on 01 July 2018 and will lead to significant changes in the timing, sequencing and documents required in the UK equity initial public offering (IPO) process (the new rules).

The new rules, which were published in October 2017 in an FCA policy statement, PS17/23, are intended to improve the range, quality and timeliness of the information that is made available to market participants during the UK equity IPO process.

The FCA’s reforms are designed to achieve an efficient and well-informed process and are intended to:

• Restore the centrality of an approved disclosure document as a source of information made available to potential investors much earlier in the process.

• Place unconnected sell-side research providers (that is, analysts in firms which are not part of the syndicate of underwriting banks on an IPO) on a more even footing with the connected analysts in the research divisions of underwriting syndicate members.

• Address the perceived conflicts of interest that some believe could arise when connected analysts within prospective syndicate banks interact with the IPO candidate and its representatives at the pitch and syndicate appointment stage in order to reduce the risk of bias in connected research.

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This article was first published in the March 2018 issue of PLC Magazine