The City’s financial watchdog, the Financial Conduct Authority (FCA), said this morning the regulator has set out “an ambitious vision” for potential reform to the way companies list in the UK in order to attract more high quality, growth companies and give investors greater opportunities.
In a paper published today, the FCA explained it is “continuing its discussion on how it can 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. “
Under one of the FCA’s suggestions, companies wishing to list in the UK would no longer have to choose between two different segments with different branding and standards.
Instead, all listed companies would need to meet one set of criteria and could then choose to opt into a further set of bonds. These would be focused on enhancing shareholder engagement and be overseen by the FCA, the watchdog clarified.
Feedback to the FCA’s earlier discussion paper, suggested many were keen to keep these additional safeguards. Companies and their shareholders would decide for themselves whether these additional bonds were right for them.
Last year, was the best year for raising investment for listed companies since 2007. In all £ 16.9 billion was raised in UK Initial Public Offerings (IPOs) including 126 companies listing on the London Stock Exchange.
Free float levels
Last year, 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.
“These changes promote broader access to listing for a wider range of companies at an earlier stage in their development and help investors use data faster to improve decision-making, while maintaining high standards,” the FCA clarified in a statement.
Clare Cole, Director of Market Oversight at the FCA, added to that: “The London market is trusted the world over by companies looking to raise capital and those wishing to invest in them.”
Cole said: “That trust is created by strong standards and a world-leading concentration of buyers, sellers and the advisers who support them.”
She went on to say that “the rules for companies who want to list here have not changed since the 1980s. Now is a good time to have an open conversation to make sure our rules are fit for the future, so we have a more accessible, competitive and growing market that is attractive to a diverse range of companies. ”
Commenting on the FCA’s proposal to abolish distinction between Standard and Premium in the Listings Regime, Charles Howarth, a corporate Partner with law firm CMS, said that “for the FCA this is quite a radical set of changes.”
Howarth told City AM this morning that “The standard listing has been seen primarily as the resort of companies that cannot quite meet the premium listing standards at IPO, many of which have expressed the aspiration to step up later. There is otherwise little attraction to a standard listing, which excludes FTSE index eligibility. ”
“Further thought needs to go into what changes are needed to the current premium listing regime to make it more attractive to high growth technology companies and international issuers,” he continued.
“Raising the threshold for requiring shareholder approval of significant transactions regime will help improve UK listed companies’ competitiveness in international auctions, but the increase from 25 per cent to 33 per cent is rather modest,” Howarth concluded.