The Financial Conduct Authority (FCA) has revealed proposals to ease retail and wealth manager access to corporate bonds.
The regulator is consulting on plans to introduce a single standard for corporate bond prospectuses, which would cover issuances of any size.
According to the FCA, this would reduce costs and barriers for companies raising capital while providing investors the information they need to make an informed decision, the regulator said.
The proposals aim to encourage listed companies to offer bonds in smaller sizes, improving investment opportunities for wealth managers and retail investors.
Meanwhile, the regulator has also proposed a simplification of requirements that apply to listed companies when they issue further shares.
“We’re opening the door for corporates to issue bonds in small sizes so that a wider range of investors can invest in them. That’s more funding for companies, more easily, and more choice for investors too,” said Simon Walls, interim executive director of markets at the FCA.
“We want to make sure investors have the information they need to make informed decisions about risk while removing unnecessary costs and widening access.”
PA Event: PA Live: A World Of Higher Inflation 2025
Reaction
Investor Access to Regulated Bonds (IARB), an industry working group sponsored by the London Stock Exchange, has advocated for increased retail and wealth investor access to bonds.
Commenting on the proposals, IARB chair Stacey Parsons said: “Change can only be achieved with the modernisation of both regulation and historic market practices. Today’s consultation from the UK Regulator allows exactly that.
“Offering industry stakeholders the opportunity to support a simplified and renewed regime removing complexities and delivering broader investor participation to the largest capital market in the world: Bonds. It is critical we support these changes, alongside the right education and guard rails for investors.”
See also: Lipper: Bonds top the charts for European inflows in 2024
Michael Smith, head of debt capital markets at Winterflood, added: “It’s important that the proposals give issuers choice. Issuers can continue to use high denominations if they want to – but the incentive to do so, which has driven the market to favour high denomination wholesale-only bonds, is being removed. If the disclosure regime is the same irrespective of the denomination, surely, using a lower denomination makes sense because this gives you a bigger primary and secondary market. This is additive demand too.
“If an issuer really wants to restrict retail access, it can, it will select a high denomination. I anticipate this will be the case whilst advisors and issuers observe what their peers do. But I look at the corporate bonds that have been issued over the last few years and I just don’t see many that wealth managers and even individuals wouldn’t want to be restricted on.
“Using credit ratings as a proxy for risk, bonds listed in the UK are predominantly investment grade. Investment grade doesn’t mean risk free but if you’re going to expose retail to bonds, this is precisely where you start. So, we are fully supportive of what the FCA is doing here. Retail had access to bonds before 2005, so it’s not like we’re breaking new ground.”
This story was written by our sister title, Portfolio Adviser
