The CFA Institute , the  global association of investment professionals, has warned that regulatory changes may not be enough to boost initial public offerings, which are important for the integrity of public markets.

Sviatoslav Rosov, an analyst in the capital markets policy group at CFA Institute, said in a blog that the number of initial public offerings in both the US and Europe have fallen by nearly half since 1996.

“The initial public offering (IPO), which has underpinned equity capital raising for decades, has been somewhat replaced by private capital transactions that are typically only known by and open to large institutional investors,” Rosov added. “Whether the demise of the IPO and the role of the public markets in capital formation are the result of excessive regulation, litigation, or the market’s focus on short-term results, the situation is clearly of concern and warrants further attention.”

As a result  the European Commission included a review of the Prospectus Directive as a priority in its action plan to launch a Capital Markets Union to increase the use of private capital by harmonising regulation across all the member states.

Rosov said the Prospectus Regulation is one of the first elements of the CMU initiative to reach the legislative stage. However he warned: “Although regulatory attempts to improve the attractiveness of IPOs, such as the Prospectus Regulation, are to be welcomed, it is not clear that the regulations are the problem.”

In contrast, the International Capital Market Association, which represents issuers, lead managers, dealers, asset managers, investors and market infrastructure providers in the international capital markets told the European Commission in March that in welcomed the agreement by co-legislators on a new prospectus regulation last year.

ICMA said: “As the European Commission moves towards the next phase of the legislative process, it will be crucial that the overarching Capital Markets Union principle of making it easier for companies to enter and raise capital on public markets is borne in mind.”

The trade body also warned on the need to avoid overly prescriptive disclosure and approval requirements in the new prospectus regulation.

Rosov continued that other theories for the decline in  IPOs include reduced demand by retail investors because of fewer small offerings; a structural shift toward fewer, larger, and more liquid stock offerings and the increased efficiency of private markets, which are also more attractive for companies wanting to avoid shareholder activism/public scrutiny.

“Some of these reasons do not appear to be amenable to regulatory intervention, which is problematic because the negative effects on public market integrity are nevertheless significant,” added Rosov. “The rise of initial coin offerings (ICOs) may be another symptom of public markets being unattractive for some deep-seated, fundamental reason, in which case, a more substantive reconsideration of the role of public markets may be necessary.”

In an ICO, tokens for a a new cryptocurrency are sold to raise money for technical development before the cryptocurrency is released. In contrast to an IPO, buying tokens in an ICO does not give the owner a stake in the in the company developing the new cryptocurrency. ICOs are also unregulated, although last month the US Securities and Exchange Commission said the sale of digital assets could be a securities offer and subject to federal regulation.