The Association of Investment Companies (AIC), which represents a broad range of investment companies including investment trusts, today released its response to the government’s consultation on Reforming Regulation Initiative.
PUBLIC MARKETS LOSING OUT
According to a recent report by the British Business Bank, the number of listed UK companies has halved since 1996 severely impacting the value of listed companies as a percentage of the UK economy, which has declined from 190% to 110%.
The AIC sees this trend continuing unless a number of measures are introduced to tackle ‘increased compliance and regulatory costs’ which have made public markets less attractive compared with private markets.
FIT FOR PURPOSE
It has recommended removing the need of companies to produce a supplemental prospectus when they raise additional capital within the same class of share, as well as additional disclosures required when reporting to stakeholders.
The changes are intended to support the economy and ensure the UK retains its leading position as a financial centre and maintain a well-regulated that better meets the needs of investors and companies.
The AIC also wants to overhaul financial reporting by making it less prescriptive, more relevant and more flexible making so that shareholders can find relevant information more easily.
For example a ‘Strategic Report’ would be a high level document with some forward looking statements and reference the ‘Historic Report’, which would be backward looking and include the directors report and corporate governance.
A ‘Bespoke Report’ would give companies an opportunity to present key insights into the characteristics of their operations and would be required on an annual basis.
Finally, a ‘Legal and Regulatory Disclosures’ report would present mandatory information required by law, but not necessarily material to understanding the performance of the business.
Only the Historic Report would need to be audited and would include the auditors’ report, while the Strategic Report would include a statement from the auditors confirming it was consistent with the Historic Report.
The AIC hopes adopting these measures will remove ‘superfluous information’ and allow investors to ‘see the wood from the trees’ while at the same time maintaining investor protection and access to information.
