In the letter, ii, which hosts 400,000 retail investors, said that not just their clients but retail investors far beyond their own customer base “deserve their share of voice, as both important stewards of capital and, at a time when the UK economy needs more support, playing a crucial part in driving growth” and that “without prescriptive rules, enshrined in legislation, retail investors will remain marginalised in key areas”.
interactive investor urges FCA to clarify ESG terminology
The investment platform continued that it supported the government’s agenda to “work to enhance the rights of retail investors” but wanted to assert ongoing concerns ahead of the chancellor’s next speech.
ii outlined similar proposals back in May but has now formalised these into an open letter.
It asked for “retail investors to have a seat at the table when it comes to secondary fundraising, enshrined in legislation with prescriptive rules”.
ii continued that disapplication of pre-emption rights has become so “normalised and commonplace that many shareholders do not even think about it anymore”. But it wants to have companies “spell out” the implications clearly to enable shareholders to make informed decisions at AGMs.
According to the platform, “the latest AGM season demonstrated all too well that some companies are better than others at spelling out the implications, and the quality of information is often too low”.
ii suggested that companies need to cultivate shareholder engagement via multimedia, hosting videos in advance of AGMs “setting out the issues, including pre-emption rights”, something its own research found investors wanted.
It also demanded legislation be “[enshrined in] plain English into investor communications, because legalese disenfranchises retail investors”.
“It is also up to UK PLC to shape the way it communicates with shareholders, and this is where we see much room for improvement. Companies must communicate better with retail investors around shareholder notifications, and we would like to see new rules from government and regulators to facilitate this,” ii added.
In the letter, ii urged the FCA to take a leaf out of the US’ book and “lead on a guide akin to the SEC’s A Plain English Handbook”.
This handbook was published in 1998 was the aim of helping “established techniques for writing in plain English to create clearer and more informative disclosure documents”, according to the SEC.
Famed stock picker Warren Buffet wrote a preface for the book in support of it, stating “if corporate lawyers and their clients follow the advice in this handbook, my life is going to become much easier”.
The final pledge was for a “quota system”, asking for retail investors to access IPOs.
“We have repeatedly said that retail investors must have a level playing field and must be treated fairly. We are hugely supportive of government plans to make the UK a more competitive place to list. But without a quota system to ensure a level playing field for retail investors, we fear the success may be limited.
“We reiterate our calls for a quota system. Without legislation, we fear there will be very little change.”