FSA publishes proposals on shortened rights issues

by Gill Montia

Story link: FSA publishes proposals on shortened rights issues

The Financial Services Authority (FSA) has published proposals that could reduce the minimum subscription period for companies undertaking rights issues to either 14 calendar days or 10 business days.

The move is aimed at making the process of raising capital more efficient and takes the timescale down from the current 21 calendar days.

The proposals are in line with recommendations made in the Rights Issue Review Group report, which was commissioned by the Government following the difficulties experienced by banks needing to recapitalise during the credit crisis.

Last summer, the futures of HBOS and Bradford & Bingley hung in the balance as their share prices fell below rights issue prices during lengthy fundraisings.

In the case of HBOS, short-trading was also alleged to have caused the group’s share price to collapse.

The proposed changes only dictate a minimum subscription period and companies will be able to conduct their rights issues over a longer period, if they so choose.

The FSA’s, managing director of wholesale and institutional markets, Sally Dewar, explains that reducing the subscription period will help limit the potential for rights issues to be disrupted by market instability, which could potentially damage investors’ confidence.

A consultation period on the proposals closes on 26 January and the FSA aims to apply the changes at the beginning of February.