The Financial Conduct Authority wants to alter the IPO process - potentially changing how the blackout period works

Emma Haslett
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Christopher Esber - Backstage - MBFWA S/S 2013/14
Shhh: the FCA said the pre-IPO blackout period gives investors too little information, too late (Source: Getty)

Alright, so the IPO market may not exactly be booming at the moment - but the UK's financial watchdog thinks it needs to be more tightly regulated all the same.

In an interim report published today, the Financial Conduct Authority (FCA) has put forward a package of measures aimed at putting an end to "potentially anti-competitive measures".

Read more: Time for the FCA to build on its pro-innovation reputation

The problem with IPOs right now

Essentially, the FCA said, investors don't have access to enough information when companies IPO.

"Currently there is a blackout period, typically of 14 days, between research on the issues being published by the banks supporting the IPO and circulation of the issuer's prospectus."

That means investors only get access to important information relatively late on in the process.

The FCA's solution? Publish research later

The paper put forward an alternative model based on two ideas: firstly, delaying the release of research by analysts at banks connected to the IPO until after the prospectus is published.

Secondly, forcing companies to invite analysts from banks not connected to the IPO, as well as independent research providers, to attend meetings to with management.

Anything else?

The FCA also said cross-selling can be especially problematic, saying the practice makes harder for banks that don't offer lending facilities to compete for primary market services. It also suggested contractual clauses purporting to limit clients' choice of providers could prove anti-competitive.

Today's report focused on mainly on primary market services - "choice, transparency, bundling and cross-subsidisation in debt and equity capital markets, and mergers and acquisitions" - but also highlighted links between competition in those services and related activities like corporate lending and broking, and ancillary services.

"Overall this is a package of proportionate measures intended to remove potentially anti-competitive practices," said Christopher Woolard, director of strategy and competition at the FCA. It's unlikely to be long before we find out whether bankers agree...

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