Corporate & Commercial

Equity Capital Markets

When discussing regulation of business within the UK, it is important to understand equity capital markets. The equity capital market, also known as ECM, refers to the marketplace that lives somewhere between the financial institutions, who are raising equity capital, and the companies. Companies engage in specific activities that exist in the equity capital market, such as public offerings, private placements, special warrants, and distributing and allocating new issues.

Major Equity Markets in the UK

The four major equity markets in the United Kingdom are all operated by the LSE, or London Stock Exchange.

Main Market

This market is used mostly by the largest and most established businesses, and is regulated by the EEA, or European Economic Area. There are two directives it is subject to, including the Directive 2003/71/EC and the Directive 2004/109/EC, which refer to the EU Prospectus Directive and the Transparency Directive, respectively. There are three subsections of the main market.


This market is regulated separately from the Main Market. While it isn’t regulated under the EU Prospectus Directive, its facility is defined for multilateral trading (MTF). There are two major types of companies that live within the AIM market.

First, companies in the AIM market include those who are working towards being in the high growth market under the Main Market, but do not yet meet the adequate criteria. Other companies choose the AIM market because the highly variable regulations are more suitable to their business needs.

Professional Securities Market (PSM)

This market is mostly made up of professional investors and depository receipts, also considered an exchange-regulated market. While it is on the Official List and an MTF, it is not governed within the EU Prospectus Directive.

Specialist Funds Market

This market includes specialist funds from both UK and international markets, and therefore is regulated by the EU. However, it is not on the Official List.

Who Regulates the Equity Capital Markets?

The equity capital markets are regulated by both regulatory bodies as well as legislative framework that governs how the markets are run. The Financial Conduct Authority (FCA): Acting under the UK Financial Services and Markets Act 2000 (FSMA), the FCA decides the criteria for companies who are seeking to join the Official List. When acting in this capacity, the FCA is often referred to as the UK Listing Authority (UKLA).
When considering the legislation setting out requirements for equity offerings, three major sections should be considered: the listing rules, the prospectus rules, and disclosure and transparency rules.

Main Market Equity Offerings

For companies who wish for a listing on the main market, there are several stringent requirements that must be followed. All applications follow a process in two stages.

  1.  Submit an application to the UKLA. This is required so the Official List can include the company’s securities.
  2. Submit an application to another investment exchange recognized by the government, like the LSE, which allows these securities to be admitted to trading.

These two stages result in twice the fees and double the applicable obligations to both areas. Both trades and the listing are dependent on one another as well, which means keeping up with both and being in good standing is essential. Otherwise, a business risks suspension from both areas.

The specific requirements, especially in terms of company size, trading accounts, minimum shares, and more, depend on whether the company is being listed on either the primary or secondary listing on the Main Market.

Companies wishing to become involved in the Equity Capital Market often find the process complicated and it is essential to keep up with obligations at every stage. As a result, it is recommended to find professional legal council.

If you’re interested in discussing a specific corporate or commercial legal matter please contact us