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FCA’s Bold Move to Revamp UK Listing Rules Sparks Debate Over Investor Rights

The Financial Conduct Authority (FCA) has proposed significant changes to the UK’s listing rules to encourage more companies to list and improve competition for investors. The move has received a positive reception although some have expressed concerns regarding investor rights.

Richard Wilson, CEO of online investment platform interactive investor, said: “We strongly support the principles behind listing rule reform to make the UK more competitive, but eroding shareholder rights risks undermining market standards, and this is not the right answer.”

Hargreaves Lansdown welcomed the proposal but asked that retail investors be at the heart of the reforms rather than an afterthought. “A focus on disclosure and engagement of investors, rather than reams of paper in a prospectus which aren’t read, is welcome,” said Anne Fairweather, head of government affairs and public policy.

Aman Behzad, founder and managing partner of Royal Park Partners, said it is encouraging to see the FCA pursue a faster overhaul of the stock market listing rules.

“The proposals will no doubt address some of the deterrents for companies by simplifying the eligibility requirements,” said Behzad. “Winning the confidence of fast-growing tech startups in particular in the face of mounting competition from other cities in Europe, not to mention the US, requires a more flexible and favourable regulatory regime. This is a step in the right direction.

“That said, it should remain a badge of honour to list in the UK, and a sustained commitment to safeguarding the interests of all stakeholders should remain an ongoing priority across the ecosystem. Only through ongoing improvements will we continue to enhance the UK’s reputation as one of the best places in the world to start, grow, and list a business.”

The FCA’s proposals include replacing the ‘standard’ and ‘premium’ listing segments with a single category for equity shares in commercial companies. The regulator has identified the need to make the listing regime more effective, easier to understand, and competitive to streamline and reform it.

Focus on transparency

The move comes as listings in the UK have reduced by 40 per cent since 2008, according to The UK Listing Review. Under the proposed changes, requirements would focus on transparency for investors to support decision-making and sponsor oversight at the listing gateway to ensure companies meet the FCA’s standards.

The FCA hopes that the proposed changes will 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. However, the FCA acknowledges that a listing decision is based on various factors, including regulation, taxation, and the availability of capital.

This proposal, which is a key part of the FCA’s commitment to strengthening the position of UK wholesale markets, reflects the organisation’s dedication to improving the UK’s status as a financial hub. 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. Today, the FCA has also published rule changes to improve how equity secondary markets operate.

The proposal is part of the FCA’s efforts to enhance the UK’s wholesale markets, a priority in its three-year strategy. While the industry has welcomed the proposal, some are cautious about the removal of investors’ rights, such as mandatory shareholder votes on transactions like acquisitions.

Overall, the proposed changes to the UK’s listing rules aim to provide a simpler and more accessible listing regime for companies and investors, boosting the attractiveness of listing in the UK. The industry’s mixed reactions show that there is a need for a balance between making the UK more competitive and maintaining investor protection.

The FCA has also published rule changes to improve how equity secondary markets operate.

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