Market investment

Regulations to be eased to help quoted firms

Keith Neilson
Keith Neilson: liquidity affected by regulations (pic: Terry Murden / DB Media Services)

Plans have been unveiled to ease European rules that are blamed for a decline in investment research into firms quoted in London.

The Financial Conduct Authority will allow ‘bundling’ of research on companies to reverse a Brussels-imposed rule which aimed to overcome conflicts of interest and make costs more transparent.

Critics have argued that the EU rules, known as the Markets in Financial Instruments Directive II, or MiFID II, have contributed to a reduction in the volume and quality of research on smaller quoted companies and the liquidity in their shares.

Keith Neilson, chief executive of Edinburgh-based software company Craneware told Daily Business last October that the regulations had played a part in the company’s shares failing to reflect its performance.

Craneware, which does all of its business in the US healthare market, and has been quoted on the Alternative Investment Market since 2007.

“We have driven up revenue and Ebitda but the market cap is half its peak,” said Mr Neilson said at the time. “Some of it is within our control, but there is very little liquidity just now.

“A reason for being a public company is to get M&A capital but I am not sure the London market will supply that for a little while.”

He said the market needed to change to help small and mid-cap companies, including the regulations around research which is no longer so widely spread and leaves retail investors at a disadvantage.

An independent review commissioned by the Treasury concluded last July that there was “a general acceptance” that the unbundling reforms “have had some adverse impacts on the provision of investment research”.

The FCA is also in the midst of a reform of UK listing rules in an effort to make London a more attractive market for companies to sell their shares.

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