ABI verdict on equity capital markets: not broken but room for improvement

On 11 July 2013, the Association of British Insurers (ABI) published its report ‘Encouraging Equity Investment’ following an extensive review of the processes for initial public offerings (IPOs) and secondary offerings. The review involved interviews with a wide range of market participants, including institutional investors, investment banks, lawyers and accountants. The report comes at a time in which the London equity capital markets have been subject to close scrutiny. Last summer, the Kay report was published, which identified ‘short-termism’ issues in the equity markets and a decline in trust and confidence. The market is also eagerly anticipating the outcome of consultation paper 12/25 published last Autumn by the Financial Services Authority (replaced by the Financial Conduct Authority), which proposed various changes to tighten up the corporate governance structure of the London listing regime.

Overall, the ABI concludes that the UK equity capital markets model is ‘not fundamentally broken’ but there are certain areas that should be addressed to improve the efficiency of the route to market. As one would expect, the ABI recommendations broadly favour investors and suggest that the current process model is biased towards issuers and their advisers…

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