Essential Corporate News – Week ending March 10, 2023

HM Treasury: Investment Research Review launched

On March 9, 2023 HM Treasury announced the appointment of a Chair of a new independent review of investment research and its contribution to the competitiveness of the UK’s capital markets (the Investment Research Review). This is part of the UK Government’s wider commitment to enhance the UK’s ability to attract companies to list and to grow.

To take advantage of the UK’s new freedoms in financial services following its withdrawal from the EU, the Government has launched several initiatives to strengthen the UK’s capital markets, including the Listing Review by Lord Hill. Lord Hill and others raised concerns about the quality and quantity of investment research produced in the UK as compared to other jurisdictions, particularly for certain sectors like tech and life sciences, and that this could undermine valuations and therefore the attractiveness of the UK as a place to list and make it harder for companies to access private capital. As a result, through the Investment Research Review, the UK is seeking to identify and address some of these concerns, to ensure London maintains its unique attractiveness as a listing’s destination.

The two main objectives of the Investment Research Review, as set out in its Terms of Reference, are to:

1. Assess the link between levels of research and the attractiveness of the UK as a destination to list, so the Investment Research Review is asked to:

• Provide evidence on how investment research provision in the UK compares or is perceived to compare with other international financial services centres, in both public and private markets.
• Consider the amount, quality and type of investment research currently provided on firms listed or quoted, or seeking to be listed or quoted, on UK public markets, and whether that has an effect on the attractiveness of UK markets for issuers. As part of this, consider if there are specific issues for research into the tech and life science sectors.
• Consider the current level of demand investors have for research, factors driving this demand, and evidence of whether the amount, quality and type of investment research is sufficient to meet such demands.

2. Evaluate options to improve the UK market for investment research and provide recommendations to this effect. In particular:

• The Investment Research Review may recommend both legislative and non-legislative measures, including measures that may fall to the Financial Conduct Authority (FCA) to consider.
• As part of this, the Investment Research Review will consider the impact of the MiFID II unbundling rules on the levels and quality of investment research and evaluate the likely impact of any proposed changes on investment and fees.
• Actions that industry should take.

A report is expected within three months of Rachel Kent’s appointment as Chair of the Investment Research Review.

(HM Treasury, New chair appointed to drive forward Edinburgh Reforms' investment research review, 09.03.2023)