London Stock Exchange boss: Listing rules shake-up is just ‘one part’ of required reform
The Financial Conduct Authority is taking “decisive steps” to overhaul London’s listing regime but tweaking the rules is just “one part” of the reform needed for the UK’s capital markets, the London Stock Exchange chief has warned.
The City watchdog revealed today it will press ahead with plans first laid out in May to shake up listing rules in the UK, including merging the standard and premium segments of the market and scrapping a requirement for firms to get shareholder approval for major deals.
The measures are seen as one of the key packages of reform for London this year after a dire year for IPOs and a slew of firms ditching their London listing for New York.
However, the chief of the London Stock Exchange Julia Hoggett said today that while listing rules are a “critical component of a healthy and effective capital market”, they would not prove a silver bullet for capital markets reform.
“The FCA is now taking clear and decisive steps to ensure that our listing rules will be fit for the needs of existing companies, the next generation of high growth companies this country produces and the investors seeking to support them as they scale,” Hoggett said in a statement.
“Updating the listing rules is only one part of the UK capital market reform agenda, but it is essential to levelling the playing field for UK listed companies when they compete with international peers and therefore critical to the competitiveness of our market and most importantly our economy.”
Burdensome rules around transactions and reporting have been blamed for some firms snubbing London’s bourse this year. Cambridge chipmaker Arm reportedly pointed to the FCA’s current regime around related party transactions, which requires firms to win shareholder approval for deals, as one of the key reasons it opted to float in new York.
Hoggett told City PM in September Arm’s snub “was down to some technical reasons” which the FCA “is now addressing”.
The latest set of reforms from the watchdog are designed to place more onus on investors to do their own due diligence while easing the regulatory burden on companies listed on the London Stock Exchange.
FCA officials warned yesterday that the changes could lead to an uptick in failures but reforms were needed to match the risk appetite of the country and deliver growth.
The chief of FTSE 100 asset manager Schroders, Peter Harrison, said today the reforms were about “putting key information in the hands of investors” and offering firms additional flexibility to “help them make the most of their public equity listing”.
“We believe these changes put investors back at the heart of the UK’s equity markets and will support our ability to play a crucial role in allocating capital to UK plc.,” he added.
Lawyers at Herbert Smith Freehills said the reforms would likely saddle investors with more risk but reform was needed to boost the health of the market.
“Investors will inevitably face some more risks but encouraging vibrant public markets and improving returns for savers and pensioners is much more important than over-regulation resulting in the slow decline of the UK’s equity markets,” Michael Jacobs, co-head of the firm’s equity capital markets business, told City PM
“The next stage is for the Government to press ahead with its broader attempts to jump start the UK’s investment culture, which is even more important than today’s announcement.”