City watchdog sets out moves to boost retail investment in shares

Britain’s financial watchdog has unveiled a raft of measures to encourage investing in stocks and shares as part of efforts to help revive the flagging London market.

The Financial Conduct Authority (FCA) set out changes to help increase consumer access to investments and help them take informed risks, which could see a shift away from the “your capital is at risk” blanket warnings on products.

It is proposing new rules for product information on investments, while also drawing a more distinct line between retail and professional investors who may not need to come within the scope of retail regulations.

The steps are part of wider efforts to “move the dial on risk” and encourage investors away from just investing in cash, according to the regulator.

Simon Walls, executive director of markets at the FCA, said: “Today’s measures support investment risk culture right along the spectrum.

“They ensure that firms can compete to give retail customers material that informs and engages them.

“They also draw a brighter line for professional markets, defined by contracting parties, informed consent and regulation that is proportionate to that.”

The plans align with aims by Chancellor Rachel Reeves to build a retail investment culture in the UK, as first set out in the so-called Leeds Reforms earlier this year, with Britain trailing behind other countries, such as the US.

In last month’s Budget, she announced a change to the individual savings account (Isa) limit that lowers the cash element from £20,000 to £12,000 with the remaining £8,000 now redirected into stocks and shares.

Ms Reeves also revealed there would be a three-year stamp duty holiday on shares bought in new UK flotations to help the London market compete for initial public offerings (IPOs).

Under the plans, the FCA will look to shift away from current investment disclosures, with “prescriptive and complex templates that consumers don’t find useful”.

It is also proposing to change regulations to allow firms to offer some tailored support.

Planned changes will see set boundaries between retail and professional investors, including a new way for wealthy and experienced investors to opt out of retail protections and streamlining how firms assess professional investors.

“This will free up firms to innovate and offer a more diverse range of products to truly experienced clients with the resources to bear more risks,” the FCA said.

But it stressed there will remain a “high threshold” for investors to qualify as professional so that “only those with experience, advice, or the ability to bear risk are taken out of retail protections… that they don’t need”.

Jonathan Parry, a partner in the capital markets division of law firm White & Case, said: “Fostering a stronger investment culture in Britain and boosting retail investor participation in the stock market will strengthen London’s competitiveness by increasing liquidity, improving access to capital for companies and bringing the UK more in line with other jurisdictions such as the US and Nordics, which benefit greatly from strong cultures of retail investing.”

Richard Stone at the Association of Investment Companies (AIC) said the FCA’s measures were a “victory for common sense”.

He said: “The whole industry has pulled together to get this outcome and we’d like to thank everyone who has campaigned so tirelessly to get these disclosures right for consumers.

“It’s essential that we build an investment culture in the UK.”