Bear with the FCA – changes are a-comin’

The key message was that the FCA seeks to be radical and that change will not be incremental.
 
The FCA’s thinking appears to have changed significantly over the last few months. The speech emphasises that the new regime will be founded on disclosure, noting the predominance of sophisticated and deeply knowledgeable institutional investors in the UK capital markets who should be allowed the flexibility to form their own judgement when making investment decisions based on issuer’s disclosures. This is a tectonic shift from the current regime where significant shareholder protections (such as shareholder approval for significant transactions) are embedded within the rules.
 
The FCA acknowledges that it will need engagement from market participants on the detail in order to determine a regime that is fit for the future. Alluding to the story of Smokey Bear, the mascot for the fire prevention campaign, who proved so successful in stopping controlled fires in US national forests and parks that it led to wildfires that wrought more damage, the speech suggests that the UK listing regime has played it too safe over recent years and that this conservative approach has come at a cost to the vitality of the public markets. Obviously, the contrary is also true: policy change can have unexpected consequences and whilst deregulation might free up the market, it could also make it a more risky and less enticing place to invest.