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'Anti-competitive' practices targeted in move by watchdog

Published 13/04/2016

Plans to overhaul the way IPOs are marketed have been put forward by the City watchdog
Plans to overhaul the way IPOs are marketed have been put forward by the City watchdog

The City watchdog has proposed plans to shake up the way initial public offerings (IPO) are marketed by investment banks as it looks to root out "anti-competitive" practices.

The Financial Conduct Authority (FCA) has put forward a raft of potential measures, including the need for investors and analysts to have access to the "right information at the right times" when a company embarks on an IPO.

It pointed out that there is currently a blackout period of about two weeks between the bank revealing its research on a company issuing shares and the publication of the prospectus.

It can mean that investors can only access the information late on in the process, while outside analysts have to base their research on a small amount of information because they cannot contact the company's management.

The FCA proposed that outside analysts have access to management, while banks working on the IPO delay their research until after the prospectus is published.

It also called on the banking industry to improve "unreliable" league tables for investment and corporate banking services, which could distort "clients' decision making".

It added that banks should also look to remove contractual clauses which can restrict client choice.

Christopher Woolard, director of strategy and competition at the FCA, said its report pinpointed areas which could improve the IPO process.

He added: "These markets are a cornerstone of the real economy, helping companies raise capital for investment and expansion. Our study shows that many investment and corporate banking clients are getting a service they want, but we have also identified some areas where improvements could be made.

"Overall this is a package of proportionate measures intended to remove potentially anti-competitive practices.

"In addition, we want to start a discussion on changing the sequence of the IPO process to make the market work better by giving investors the right information at the right time."

The FCA said it will publish its final report in the summer.

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