FCA pushes for reform of London’s listing regime in an attempt to boost growth: ‘A radical set of changes’
The City watchdog has outlined plans to reshape the two-tier structure of the London Stock Exchange’s main market today in a bid to simplify listing rules and tempt more fast-growth tech firms to come to market.
The Financial Conduct Authority revealed proposals to do-away with the current split between a higher “premium” tier of the main market and the lower “standard” tier, which does not require the same regulatory and corporate governance standards.
A move to ‘rebrand’ the two tiers comes after a recommendation in Lord Jonathan Hill’s landmark review of the listing regime last year, amid warnings that the distinction risked casting a stigma over firms that opt for the lower regulatory requirements and dissuading some firms from floating on the market.
Inclusion in the premium segment alone allows firms to be included into indices – one of the key draws of a shift onto the public markets for founders.
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 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.”
‘Radical’
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 quite a radical set of changes.”
Howarth told City PM 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.
‘Just part of the solution’
Boss of the pensions fintech PensionBee, Romi Savova, which recently transferred from the standard listing to the premium segment of the market, told City PM earlier this year that the move had been spurred by the more rigorous standards placed on firms with a premium listing, and the increased trading liquidity of its shares through inclusion in the FTSE UK Index Series.
Speaking with City PM today however, she said the reforms should only be part of the reforms.
“While simplification to the listing rules is welcome, this should only form part of the solution when ensuring that London remains an attractive hub for entrepreneurs.” she said.
“It is critical that the FCA and the government focus on enhancing the conditions in which listed companies can thrive, including appropriate taxation policies to incentivise public stock ownership, retail investor participation and a greater volume of research.”
Charm offensive
The calls come amid a push to boost the appeal of London as a listings destinations, with political figures looking to woo tech giants into floating in the capital.
Ministers are currently locked in a battle to tempt chipmaker Arm into floating in London despite the boss if its current owner Softbank indicating the firm favoured floating in New York.
City Minister John Glen met with tech bosses including PensionBee and Klarna in February to try and tempt them to come to float in London.