On Friday, Winterflood submitted its response to the Financial Conduct Authority’s (FCA) Consultation Paper CP25/2. We have been leading advocates for retail inclusion in the bond market for many years and believe that these reforms, if implemented correctly, will play a crucial role in opening high-quality corporate bonds to retail investors, allowing them more access to investment opportunities that have been out of reach.
Overall, we are positive on the proposals. The simplification of disclosure requirements for low-denomination bonds will remove unnecessary barriers and align requirements with higher-denomination bonds, effectively ‘levelling the playing field’ for all investors, from institutional to retail. In our response we have highlighted the importance of ensuring that the proposals work for retail inclusion from a practical perspective, and outline our thoughts on how retail investors could participate in the existing, well established, bookbuild process. We also highlight that there may be unintended consequences in categorising bonds from certain issuers as ‘non-complex’ which may lead to other types of bonds being seen as ‘complex’ in nature.
We commend the FCA for the work it has done on CP25/2 to date and we see this consultation period as a further step towards the democratisation of investing opportunities, allowing retail investors the same access to investments as institutional investors and creating a more equitable UK financial market.
If you would like to discuss the topic in more details, please contact: Michael Smith, CFA, Debt Capital Markets at Winterflood Securities.
