In a speech at the Westminster Business Forum on Tuesday (6 February), FCA director of market oversight Clare Cole said the regulator has heard from participants “across the market ecosystem” urging for changes to the UK listings structure.
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The UK listings regime reforms were first unveiled in December 2023 alongside a consultation paper, which will remain open for submissions until 22 March 2024.
The document comprised the “first tranche” of the new rulebook, outlining the main rules, with the second part expected for later in Q1 2024, Cole explained.
So far, the FCA has heard from prospective issuers, investors, asset managers and owners, pension schemes, advisers, trade bodies and stakeholder representatives in a variety of settings, all calling for the need to bolster the attractiveness of UK public markets.
“The disadvantage faced by UK-listed companies when competing on the global M&A stage is very real,” Cole said. “It manifests itself in the form of processes that increase issuer and shareholder costs, and also deal contingency that means UK issuers may pay a premium or lose out on opportunities to their non-UK peers.”
This has led to the “stifling of innovation”, she added, resulting in not just greater costs for capital markets but also for the entire economic ecosystem, with small and mid-cap companies the most affected.
As a result, UK investors have been increasingly exercising their investment choice in other markets where “certain elements of our regime are not imposed by regulation”, Cole noted.
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“The latest Office for National Statistics (ONS) data shows that only 4% of UK quoted issuers are held by UK pension schemes and insurers.”
Subsequently, she argued the reforms have been aimed at “addressing the source of friction and inefficiency” in the current rules.
Some of the proposals include: scrapping the ‘premium’ and ‘standard’ listing segments to create a consolidated category for commercial companies; no longer requiring FCA and shareholder approvals for transactions “below reverse takeover levels”, “rationalising” the related party transaction regime, while retaining independent checks; and alleviating sunset clauses on dual class shares structures for a wider range of pre-IPO participants to hold such shares in issuers post-IPO.
“Such structures may encourage companies at the cutting edge of innovation to remain in the UK,” Cole argued.
“Where companies choose to list elsewhere, the UK economy loses out on the consequent scale-up effect – from the focus of the company’s management, its future growth and operations, further innovation, and increase in value for investors,” she added.
“As well as missing out on the development of a community of similar peer companies. When the UK’s capital markets lose out, the UK as a whole loses out.”
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