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The Financial Conduct Authority (FCA) proposes to reform and streamline the listing rules in the UK to help attract a wider range of companies, encourage competition, and improve choice for investors.
At present, businesses wanting to list shares on any of the Financial Times Stock Exchange Group (FTSE) indexes – which include some of the largest world-wide firms – have to hold a premium listing and are required to comply with the UK’s highest standards of regulation and pay substantial costs.
The FCA has said it wants to make the rules companies must follow to be allowed to list their shares in the UK, “more effective, easier to understand and more competitive”.
While the UK has been Europe’s biggest financial hub for many years, listings in the UK have reduced by 40% since 2008, according to The UK Listing Review.
The decision by a firm to list is based on many more factors than regulation alone, such as taxation and the availability of capital.
However, the listing regime in the UK has been seen by some issuers and advisers as too complicated and onerous. This is why the FCA is proposing significant changes to the listing rulebook, including replacing its existing ‘standard’ and ‘premium’ listing segments with a single category for equity shares in commercial companies.
Under the proposals, requirements would be focussed on transparency for investors to support decision making and sponsor oversight at the listing gateway to ensure companies can meet the FCA’s standards.
A single equity category would remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies pursuing their business strategies.
The proposed changes aim to provide a simpler and more accessible UK listing regime for companies, improving the attractiveness of listing in the UK and providing a wider range of investment opportunities for investors.
The FCA wants an open discussion about the change to risk appetite that a listing regime based on disclosure and engagement, rather than regulatory rules, would require.