WIREDGOV

The Financial Services Authority (FSA) is proposing to reduce the minimum subscription period for companies undertaking a rights issue to either 14 calendar days or 10 business days.  Reducing the minimum subscription period from 21 calendar days will help make capital raising more efficient.

These proposals follow recommendations made in the Rights Issue Review Group (RIRG) report to the Chancellor of the Exchequer on 24 November 2008

During a rights issue subscription period, existing shareholders of the company have the right to buy new shares in proportion to their existing holdings.  These rights can also be bought and sold in the market.  The proposed rule change will only apply to the minimum subscription period.  Issuers and their advisers can still conduct their rights issues over a longer period, if required.

Sally Dewar, managing director of wholesale and institutional markets at the FSA, said:

"Reducing the subscription period will enable companies to raise capital much more quickly from the markets, when they need it most.  Taking these steps will help limit the potential for rights issues to be disrupted by market instability, which could potentially damage investors’ confidence."

The FSA, as part of the RIRG, has extensively sought market views on these proposals.  Consultation on other recommendations of the RIRG that require changes to FSA rules will take place later in the year.

The consultation closes on 26 January 2009.  The FSA will aim to finalise the proposals with changes to the relevant Listing Rules taking effect at the start of February 2009.

Notes to editors

1. The full consultation paper can be found on the FSA website - Rights issue subscription periods "CP09/4".
2. On 5 January 2009, the Association of British Insurers (ABI) put in place a recommendation from the Rights Issue Review Group to change its guidelines on the allotment of shares.  Full details of the new guidelines can be found on the ABI website.  Changes to the ABI guidelines together with shortening the minimum subscription period could mean a rights issue runs over 16 days rather than the 39 days that it can currently take.    
3. The full report with the recommendations made on capital raising by the Rights Issue Review Group can be found on the Treasury's website.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.