London Stock Exchange defends deregulation drive after pension group’s warning
The London Stock Exchange has defended its deregulation drive today after a top pension group sounded the alarm over the lobbying activities of a City taskforce led by the exchange’s chief executive Julia Hoggett.
In a letter to London Stock Exchange-owner LSEG last week, the Local Authority Pension Fund Forum (LAPFF), which represents £350bn of pension cash and is collectively the biggest holders of UK shares, said it was “very concerned” about the efforts of the Capital Markets Industry Taskforce (CMIT), led by Hogett.
The taskforce, which counts city bigwigs like Schroders chief Peter Harrison and GSK chair Sir Jonathan Symonds among its members, has banged the drum for an overhaul of capital markets rules since its creation in 2022.
The taskforce has opposed efforts to strengthen the UK’s corporate governance code, many of which were ultimately ditched in January as part of a push from the government to focus on making the UK more competitive.
It has also lobbied to allow firms to pay more to attract the best global executives.
However, LAPFF warned last it was “concerned that the positions being taken by CMIT are neither evidence based nor balanced, and some positions have little credibility in basic terms”, pointing to a lack of representation of asset owners on the CMIT, as opposed to “fee takers” such as asset managers.
One week after the letter was sent, LSEG has now hit back at the pension body, claiming it is working with companies across the industry to strip out “onerous” rules.
“Where we believe aspects of the regulatory regime are not working as well as they should, or are hindering activity in our markets, we believe it is our duty to address these by engaging market participants, regulators, and policymakers,” an LSEG spokesperson said, in comments shared with City PM
“Key components of the UK’s regime have not been reformed for 40 years and have left UK listed companies and the UK capital markets unduly constrained compared to their global peers.”
The response from LSEG underscores the growing tension between pension money managers and some City firms over the pace of reform to UK capital markets. Some in the City point the finger at pension funds as a major culprit for a lack of cash flowing into the markets and the lacklustre valuations of London-listed companies.
Just four per cent of the stock market is now held by pension funds, down from 39 per cent twenty years ago, according to data from think tank New Financial.
However, some pension money managers have pushed for a more cautious approach to reform.
The government has looked to pile pressure on the sector to back British equities and Jeremy Hunt announced in his March Budget that pension funds would be forced to disclose how much of their portfolio is made up of London-listed firms.
Regulators are also looking to ease the regulatory burden on listed companies to attract more firms onto the market. After Hoggett’s CMIT pushed for slimmer rules for listed companies, the Financial Conduct Authority said it would overhaul its listing rules in December, with changes due to come in this summer.
“We see the reforms proposed by the FCA as a good balance between empowering investors through good disclosure, without preventing companies from accessing our markets due to unnecessarily onerous eligibility requirements,” LSEG said in the comments today.