Listing regime: ‘time to break the old school club’

interactive investor calls on the FCA to protect private investor rights and promote plain English.

• FCA should introduce guidance similar to that issued in the US by the SEC in its A Plain English Handbook
• Warren Buffett has backed the US plain English guidance

Today, the FCA sets out a vision for potential reform of the listing regime to attract more high-quality growth companies and give investors greater opportunities.

interactive investor, the UK’s second-largest investment platform for private investors, will be considering the proposals in detail. However, while this discussion paper is focussed around listing segments and listing standards, ii reiterates it’s calls for a quota system at IPO for retail investors, to ensure that private investors have a seat at the table.

interactive investor is highly supportive of listing regime reform that would make the UK a more competitive place to list, but it wants to make sure reform does not come at the expense of retail investor rights. Interactive investor is also calling on the regulator to make the most of reform by enshrining plain English into investor communications, because legalese disenfranchises private investors.

Today’s discussion paper from the FCA states that one of its objectives is to “empower investors to conduct their own decision-making over the suitability of listed issuers to meet their investment needs through clear, high-quality disclosures”

interactive investor believes that unless there is a very radical reform of the Prospectus Regime, these documents are still going to be intimidating to your average retail investor.

Richard Wilson, CEO, interactive investor, says: “It’s time to break the old school club that has undermined the interests of retail investors for far too long. We are hugely supportive of plans to make the UK a more competitive place to list, but private investors must have a seat at the table, they must be treated fairly. So, we reiterate our calls for a quota system. Without legislation, we fear there will be very little change. But we’d also like to see plain English enshrined in legislation, because shareholder communications written in legalese disenfranchise private investors and perpetuate the status quo.”

Inspiration from the US

Interactive investor would like to see UK financial authorities introducing guidance on plain English matching that given by the US Securities and Exchange Commission. Listing regime reform is an opportunity for the regulator to think about shareholder communications. In particular, interactive investor would like to see the FCA lead on a guide akin to the SEC’s A Plain English Handbook. 

The Plain English Handbook was published by the SEC in 1998, and has for more than two decades provided invaluable advice to Wall Street on communicating with investors. The world’s most famous investor, Warren Buffett, not only backed the guide, but wrote a forward to it.

Among other things, Mr Buffett wrote:

“For more than forty years, I’ve studied the documents that public companies file. Too often, I’ve been unable to decipher just what is being said or, worse yet, had to conclude that nothing was being said.If corporate lawyers and their clients follow the advice in this handbook, my life is going to become much easier.”

Richard Wilson, Chief Executive of interactive investor, says: “Private investors deserve far better treatment. Individuals today can easily invest for their future, or on behalf of family members, in a way that is low-cost and transparent. This is something we are proud to enable.

“But private investors are also important stewards of capital and deserve their share of voice. But they can only make their voice heard if they are given clear information. The disapplication of pre-emption rights, which has now become so normalised and commonplace that many shareholders don’t even think about it anymore, is a case in point: the language needs to be crystal clear, so investors can think through the implications.

“Given that the UK produced George Orwell, and his masterpiece Politics and the English Language, which emphasised the value of clarity so brilliantly, you might expect us to be leading the world in this respect.”