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London Stock Exchange rules shaken up in bid to stop companies moving overseas | London Stock Exchange
The City's watchdog will this month launch the biggest overhaul of London's stock market rules in more than 30 years, in a bid to make the UK a more attractive place to list shares.
The Financial Conduct Authority (FCA) confirmed on Thursday that it would streamline and relax rules for listed companies on July 29, after months of lamentation over the exodus of companies from the London Stock Exchange to rival financial centres.
The new rules will scrap the UK's two-tier system of standard and premium listings. The premium listing imposed additional requirements on companies in exchange for a more prestigious label and inclusion in the FTSE branded indices.
The move away from the premium label means companies will no longer need to vote on major mergers or takeovers before they can approve them. While the current rules have been criticized by some for delaying or increasing the cost of standard transactions designed to help companies grow, the change has raised concerns about the erosion of shareholder democracy.
Companies will soon operate under a single set of rules, simplifying what some industry bodies have called a complex and costly listing regime.
“Our aim is to encourage a wider range of businesses to choose to list, raise capital and grow in the UK, whilst maintaining high standards of market integrity and consumer protection,” said FCA Chief Executive Nikhil Rathi.
The changes are the result of recommendations made in 2021 by Jonathan Hill, the former European Commissioner for Finance. The FCA has already reduced the proportion of shares that must be offered to outside investors from 25% to 10%, and is allowing companies to issue dual-class shares that give founders more control over listed companies, in response to Lord Hills’ report. The two sets of rules came into force in December 2021.
It is also hoped that the latest changes will reduce the number of companies leaving London or avoiding it for overseas competitors, including the United States.
The need for change is clear and widely recognised, Rathi said. The risk otherwise is that our regime will become increasingly distant from those of other jurisdictions, making it less likely that companies looking to grow will choose the UK as a place to list their shares.
Investment platform AJ Bell said the overhaul had serious potential drawbacks.
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The government is clearly looking to boost UK listings as part of its efforts to revitalise the City of London, said Dan Coatsworth, investment analyst at AJ Bell.
The FCA's reforms risk reducing the quality of the UK stock market to a balsa wood house. This includes giving shareholders less say on issues such as acquisitions, even if they own the company.
In May, Paddy Power owner Flutter said it would move its primary listing to New York, while British chipmaker Arm opted to list on Wall Street last August after the government failed to persuade it to list in London. British fund supermarket Hargreaves Lansdown said in June it would accept a bid from private equity investors, leaving another hole in the FTSE 100 index.
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