The Financial Conduct Authority proposes to reform and streamline the listing rules in the UK to help attract a wider range of companies, encourage competition and improve choice for investors.
The FCA wants to make the listing regime, the rules companies must follow to be allowed to list their shares in the UK, more effective, easier to understand and more competitive.
The FCA has been acting to improve the UK’s position for years.
Within months of leaving the European Union, two years ago, the FCA significantly reformed the listing regime to boost growth and competitiveness.
While the UK has been Europe’s biggest financial hub for many years, listings in the UK have reduced by 40% since 2008, according to The UK Listing Review.
The decision by a firm to list is based on many more factors than regulation alone, such as taxation and the availability of capital.
However, the listing regime in the UK has been seen by some issuers and advisers as too complicated and onerous.
This is why the FCA is proposing significant changes to the listing rulebook, including replacing its existing ‘standard’ and ‘premium’ listing segments with a single category for equity shares in commercial companies.
Under the proposals, requirements would be focussed on transparency for investors to support decision making and sponsor oversight at the listing gateway to ensure companies can meet the FCA’s standards.
A single equity category would remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies pursuing their business strategies.
The proposed changes aim to provide a simpler and more accessible UK listing regime for companies, improving the attractiveness of listing in the UK and providing a wider range of investment opportunities for investors.
The FCA wants an open discussion about the change to risk appetite that a listing regime based on disclosure and engagement, rather than regulatory rules, would require.
Nikhil Rathi, Chief Executive of the FCA, said:
“London is a major international market with a deservedly good reputation globally among companies aiming to raise capital.
“Our proposed reforms would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement.
“While regulation plays an important part, a company’s decision on whether, and where to list, is influenced by many factors so substantive change will require a concerted effort from government and industry as well.
“We want to encourage more companies to list and grow in the UK, versus other highly competitive international markets.”
The FCA’s work on listings is a key part of its commitment to strengthen the position of UK wholesale markets, which is a priority in its three-year strategy.
In 2021, the FCA moved quickly to improve the listing regime by lowering free float levels, allowing certain forms of dual class share structures and introducing digital financial reporting.
Improving secondary markets
The FCA will also publish rule changes to improve how equity secondary markets operate.
The rule changes support the FCA’s commitment for transparency in equity markets and are part of the Wholesale Markets Review the FCA is conducting alongside government to tailor the UK’s rules post-Brexit, so they better suit UK markets and promote competition and growth.