City watchdog plots rules shake-up to open up Britain’s bond markets to retail investors by scrapping ‘indiscriminate’ disclosure rules
- The FCA has launched a consultation into democratising bond markets
- The regulator is looking to ending the differing disclosure requirements
- It also plans to make a clearer distinction between non-equity securities
The financial regulator has taken a major step towards opening up bond markets for Britain’s retail investors.
The Financial Conduct Authority (FCA) is consulting on removing barriers to participation in fixed income, which could see the regulator bring an end to onerous disclosure requirements that effectively bar everyday investors from the market.
In the UK, the average investor can buy equities of all kinds but are largely shut out of investing in bond markets directly and typically invest in a bond fund to build fixed income exposure instead.
The FCA is looking at allowing everyday investors better access to bond markets
Approximately 89 per cent of securities included in the regulator’s Official List are non-equity securities.
There have been increased regulatory requirements for bond issuers in the years since the 2008 global financial crisis, including an increase in disclosure rules for products with a denomination of less than €100,000.
For companies issuing non-equity securities, meeting the increased disclosure standards has become a more onerous task so they typically opt instead to borrow from large financial institutions.
This is because it requires a summary, details on the issuer’s history and inclusion of cash flow statements and other financial information.
It’s therefore often easier to completely avoid targeting retail investors that can’t meet the €100,00 threshold.
The FCA said this has led to a ‘bifurcation between wholesale and retail markets’ and while the €100,000 threshold was intended as an investor protection measure it has been ‘indiscriminate’.
‘We are therefore proposing to adopt a single standard for bond disclosure in the prospectus regime, with the existing wholesale disclosure annexes as a starting point.’
The FCA also said it was considering whether the regime should make a clearer distinction between types of non-equity securities to ‘reduce risks of investor harm’.
Investors should always tread carefully when buying company debt via bonds, because the money you make back depends on the firm not going bust.
> Read our guide to investing in mini, retail and corporate bonds

The mini-bond market came under scrutiny following the collapse of London Capital and Finance, which left thousands of savers with huge losses.
Elsewhere, British investors in a £50million bond from Indian Bollywood group, Eros Media World, faced a similar predicament after the group failed to make an interest payment in October 2022.
In March, it offered investors 60p per £1 on half of the bonds, with the remaining bonds rolled into a new transaction that will not be repaid until 2026.
Stacey Parsons, head of fixed income at Winterflood Securities and chair of the working group Investor Access to Regulated Bonds, said the FCA’s new proposals were a ‘beam of light’.
‘The regulation may well turn out to be the easy part in all this, changes to process will also be required by stakeholders in the debt capital markets ecosystem to achieve better access for all investors.
‘However, capital markets can and do adapt and we welcome the FCA offering a legitimate pathway of change. What is needed now is debt capital markets to function with everyone in mind – both wholesale and retail, where it is feasible.’
The consultation period will run until September 2023.
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