The Financial Services and Markets Act 2023 (FSMA 2023) introduces reforms aimed at enhancing the UK’s capital-raising ecosystem. For mid-market investment banks, these changes simplify the fundraising process, making it easier and more cost-effective for smaller enterprises to access equity and debt markets.

Key Changes for Fundraising:

Modernised Prospectus Rules: Firms can now raise up to 75% of their existing share capital without triggering full prospectus requirements, enabling quicker and cheaper equity raises. This is a huge increase from the previous limit of 20% and should make raising capital significantly easier for mid-market firms.

Streamlined Secondary Fundraising: The Act reduces disclosure requirements for follow-on capital raises, helping mid-market clients move faster to secure growth funding.

Enhanced FCA Oversight: FSMA 2023 grants the FCA greater discretion in overseeing fundraising activities, enabling a more proportionate approach to regulation. This shift allows the FCA to tailor its oversight to the specific circumstances of each fundraising event, promoting innovation and efficiency in capital markets.

Benefits for Mid-Market Investment Banks:

Faster Access to Markets: Simplified compliance enables investment banks to execute fundraising transactions more efficiently, particularly for smaller firms needing rapid growth capital.

Lower Costs for Clients: By cutting down on administrative burdens, mid-market banks can reduce the financial barrier to market entry for smaller enterprises.

Strengthened Client Relationships: Banks can differentiate themselves by offering expertise in leveraging these reforms, ensuring clients maximise their fundraising potential under the new rules.

Considerations for Banks:

Guidance on Compliance: Mid-Market firms may lack the resources to fully understand the FSMA 2023 changes, requiring banks to offer detailed advisory support.

Sector-Specific Opportunities: Industries with rapid growth cycles, requiring frequent injections of capital, like renewable energy, tech, and consumer goods stand to benefit most, allowing mid-market banks to specialise and expand their market reach.

The FSMA 2023 offers mid-market investment banks a chance to deliver more tailored, cost-effective fundraising solutions, aligning with the UK's push for a more dynamic financial ecosystem.

Aalto Capital tracks changes to regulations in the financial sector closely to provide its clients with the best services possible. If you have questions about any recent regulatory legislation or rule changes, please do not hesitate to reach out via the email below.