By Huw Jones
LONDON (Reuters) -Britain’s markets watchdog has proposed a single entry point to simplify and speed up company listings, in the biggest shake up of its kind in three decades to help London compete better with New York as well as EU centres in the wake of Brexit.
Britain accounted for only 5% of IPOs globally between 2015 and 2020, with the number of listings down by about 40% from a peak in 2008. The government failed to persuade UK chip designer Arm to list in London rather than New York.
As expected, the Financial Conduct Authority (FCA) said it proposes merging the “premium” listing on the London Stock Exchange – which has tougher rules – with the less onerous standard listing to meet one set of criteria under the banner of a “commercial” company listing.
It largely mirrors a discussion paper from last year that triggered some concern about a return to light-touch regulation.
“We are working to strengthen the attractiveness of UK capital markets and supporting UK competitiveness and growth,” Sarah Pritchard, FCA executive director for markets and international, said in a statement.
It was important that others consider what they in turn can do to make sure the UK remains an attractive place for companies to raise capital given listing rules were not the primary reason for choosing a location, the FCA said.
It has proposed relying more on disclosures by companies, rather than specific rules, thereby transferring more of the risk from an IPO to investors.
Companies would disclose any proposed significant corporate transaction, rather than the current mandatory vote of shareholders, which can be time-consuming in a fast-moving competitive bid.
“There is little sign that the widely held and clearly communicated investor concerns about weakening corporate governance standards have been taken into account,” said Railpen, a pensions company and major investor.
However, shareholder approval of a reverse takeover or a de-listing would remain, and there would need to be written relationship agreements with controlling shareholders.
London Stock Exchange CEO Julia Hoggett said listing rules were a critical component of a healthy and competitive capital market, and essential to “levelling the playing field for UK listed company when they compete with international peers”.
MORE FAILURES POSSIBLE
Britain is keen to shake up listings and other financial rules to boost growth at a time when private money is needed to help the country invest to meet net-zero targets.
“The UK is Europe’s leading hub for investment but it’s a competitive world and we are by no means complacent,” Britain’s financial services minister Bim Afolami said.
The EU is already approving a law to help attract more listings on the bloc’s stock markets.
The FCA has cautioned that easing rules must be accompanied by a change in investor understanding and attitude towards risk.
“The proposals could entail an increased possibility of failures, but the changes set out would better reflect the risk appetite the economy needs to achieve growth,” the FCA said.
UK Finance, a banking industry body, said the proposals strike the right balance between managing risk and encouraging growth that will help significantly in attracting more listings.
The 400-pages of detailed proposals are being put out to public consultation until March, with final rules coming into effect in the second half of 2024.
The FCA also confirmed new rules for a bond market “consolidated tape” or real-time feed of transaction prices to help investors spot the best deals.
“The proposals will help investors hold their brokers accountable which will improve the competition for their services and enable market participants to manage risk and maintain market stability,” the FCA said, adding it would outline its next steps for a stock price tape next year.
The EU has approved a law to regulate stock, bond and derivatives tapes.
(Reporting by Huw Jones; Editing by Hugh Lawson and Bernadette Baum)