Regulator proposes sweeping changes to UK listing regime

The UK’s monetary regulator is pursuing a deeper and sooner overhaul of the inventory market listing guidelines after a string of high-profile corporations shunned the City in favour of New York, elevating questions on London’s future.

In a session doc to be printed on Wednesday, the Financial Conduct Authority will define plans to scrap guidelines forcing a shareholder vote on transactions between UK-listed corporations and “related parties”. The provisions have been blamed for the choice by SoftBank to record its Cambridge-based chip designer Arm on Nasdaq earlier this yr.

The listings revamp will make it simpler for corporations to be a part of the market by eradicating a requirement for companies to have three years of audited monetary accounts. The regulator has additionally bowed to business calls for by simplifying plans to fuse London’s commonplace and premium markets right into a single class.

The new guidelines could possibly be in place by early subsequent yr for corporations in search of new listings in London and phased in for corporations already on the trade. “This is us moving at high speed,” mentioned one particular person aware of the FCA’s place, including that the business was pushing the regulator to “move quickly”.

The urgency displays rising alarm on the decline of London’s inventory trade, the place the variety of listed corporations has fallen by 40 per cent since 2008.

This yr has been significantly bruising. At the identical time as Arm opted for a Nasdaq listing, constructing supplies big CRH determined to transfer its listing from London to New York. The City has secured simply six new listings in contrast to 56 on US exchanges and 34 on different European inventory markets up to now in 2023.

“We want to encourage more companies to list and grow in the UK, versus other highly competitive international markets,” mentioned Nikhil Rathi, chief govt of the FCA. He added that the reforms would “significantly rebalance the burden of regulation to the benefit of listed companies and investors who [were] willing to set their own risk appetite and terms of engagement”.

City minister Andrew Griffith described the package deal as an “important step” in “improving the international competitiveness of the UK as a place to list”.

The most important change within the FCA’s method, following an preliminary session launched final yr, is within the space of related-party transactions, the place the regulator initially proposed retaining a compulsory shareholder vote. An individual aware of the watchdog’s pondering mentioned it had obtained suggestions that the obligatory vote was considered as a big barrier for corporations contemplating new listings.

Arm, for instance, would have wanted a shareholder vote on transfers of sources, companies and different obligations with the huge array of corporations owned by its guardian SoftBank, an obligation that was seen as overly burdensome by executives.

Under the most recent proposals, UK listed corporations will nonetheless have to disclose related-party transactions.

There was additionally little enthusiasm for the FCA’s plans to change commonplace and premium listings in London with a single listing and “optional add-ons”. The FCA now desires to have a single listing for all issuers of fairness, with no add-ons.

Charles Howarth, a company accomplice with regulation agency CMS, mentioned the present construction of premium and commonplace listings, had “caused confusion and the standard listing has always been considered second class”.

Lord Jonathan Hill, writer of a report on the UK’s listing regime, mentioned the FCA’s proposals constructed on the “direction of travel” of his suggestions and “if implemented, London would be able to stand toe to toe with our international competitors.”

But he warned final week that laws might solely go up to now in arresting the sharp decline within the City’s public markets, and {that a} mindset shift on issues equivalent to danger, pay and tradition was additionally wanted.

Chris Hayward, coverage chair on the City of London Corporation, mentioned the FCA’s proposals have been “significant” however additional changes have been wanted, which he would define later this yr.

Conor Lawlor, managing director of capital markets at UK Finance, the banking business physique, mentioned: “Dynamic and well-functioning capital markets play a critical role in supporting the real economy in the UK and for them to remain competitive globally we need to act now to ensure that they are also fit for the future.”

Additional reporting by Nikou Asgari in London