FCA Listings Regime Overhaul: Why You Should Care

But
should
you
care?

The
changes
confirmed
by
the
FCA
yesterday
are
the
result
of
several
years
of
wrangling
over
the
UK’s
listing
regime.
Politically,
this
was
a
process
initiated
by
the
previous
government,
and
in
particular

former
chancellor
Jeremy
Hunt
(though
the
regulator
is
of
course,
wink
wink,
independent
of
Whitehall
influence).

UK
Listings
Overhaul:
What
Will
Change?

The
UK’s
listing
regime
is
the
set
of
rules
that
governs
the
steps
companies
have
to
take
to
“goes
public.”
It’s
the
process
by
which
shares
in,
say,
Example
Ltd
become
Example
PLC,
are
listed
on
an
exchange,
included
in
indices,
and
traded
by
the
public.

At
the
moment,
the
UK
operates
under
a
system
that
places
restrictions
on
dual-class
share
schemes,
giving
company
insiders
a
greater
share
of
a
company’s
voting
power
compared
with
other
shareholders.
Also
in
the
mix
are
requirements
to
seek
shareholder
approval
for
certain
significant
corporate
transactions,
and
transactions
with
related
parties.

Both
of
these
elements
are
now
being
rolled
back
in
favour
of
a
“streamlined”
categorisation
for
companies
seeking
to
publicly
sell
their
shares
in
the
UK.
The
UK
will
also
move
to
a
“disclosure-based”
system,
which
the
FCA
hopes
will
“put
sufficient
information
in
the
hands
of
investors,
so
they
can
influence
company
behaviour
and
decide
how
they
want
to
invest.”

UK
Listings
Overhaul:
What
Are
The
Risks?

But
the
operative
word
there
is
“hope.”
Because
it’s
all
a
bit
of
a
gamble.

So
says
Lindsey
Stewart,
director
of
investment
stewardship
research
at
Morningstar.
An
expert
in
corporate
governance
and
boardroom
decision
making,
Stewart
is
a
former
head
of
stakeholder
engagement
at
the
Financial
Reporting
Council,
the
UK
body
in
charge
of
regulating
auditors,
actuaries,
and
accountants.

“The
new
listing
rules
represent
a
big
gamble
that
cutting
red
tape
for
company
founders
and
executives
will
unleash
a
wave
of
new
and
innovative
businesses
listing
and
raising
capital
in
London.
What’s
not
to
like?”
he
says.

“Well,
the
‘red
tape’
in
question
is
a
number
of
long-cherished
shareholder
protections
that
many
claim
are
integral
to
the
UK’s
capital
market
culture
of
strong
corporate
governance.
In
particular,
a
number
of
institutional
investors
claim
the
rollback
of
these
protections
is
too
high
a
price
to
pay,
and
would
attract
more
companies
with
inadequate
governance
arrangements
to
the
UK
market.”

That’s
a
very
important
point.
Because
it
shows
that
these
changes
are
not
one
gamble,
they
are,
in
fact,
two.

The
first
is
that
the
disclosure
regime
will
sufficiently
inform
investors
to
allow
them
to
make
good
decisions
when
buying
a
company’s
shares.
But
the
second
is
that
investors
themselves
won’t
be
duped
by
companies
that,
at
the
very
best,
overpromise
and
underdeliver,
and,
in
the
worst-case
scenario,
do
so
deliberately.
Need
it
be
said
that
equity
investing
is
inherantly
risky?
Arguably
it
just
got
a
little
riskier,
and
particularly
for
retail –
read:
unadvised –
investors.

Broadly
speaking,
we
are
not
awash
with
data
on
the
financial
confidence
of
UK
equity
investors.
However,
what
we
do
know
is
financial
literacy
in
the
UK
is
poor.
In
a
friendly
quiz,
one
company
tested
the
financial
knowledge
of
2,000
UK
consumers.

Only
27%
passed.

It’s
not
too
much
of
a
leap
to
imagine
that
efforts
to
ignite
exciting
IPO
activity
in
the
UK’s
public
equity
markets
might
also
encourage
people
to
get
involved
in
share
sales
they
are
not
actually
equipped
to
navigate.

Sounds
righteous,
huh?
Well,
that’s
an
operative
word
too.

Step
forward
the
Church
of
England,
and
the
chief
responsible
investment
officer
on
its
pensions
board,
Adam
Matthews.
Matthews
is
a
prominent
sustainability
and
governance
campaigner.
He
has
this
question:
“in
whose
interest
are
the
weakening
of
the
UK
listings
rules
announced
this
morning?”

Certainly,
they
could
work
in
the
interests
of
investors,
who
could
stand
to
win
financially
from
what’s
been
termed
by
optimistic
onlookers
as
“big
bang
2.0,”
a
reference
to
the
original
deregulatory
changes

made
by
prime
minister
Margaret
Thatcher
in
the
1980s,
which
themselves
heralded
a
boom
in
trading
activity.
But
in
the
short-term,
politicians
are
also
trying
to
save
face.

MUKnificent
Seven:
Will
it
Happen?

Ambitious
companies
are
deserting
London.
That’s
the
elephant
in
the
room.

Betting
company
Flutter
(FLUT),
building
materials
firm
CRH
(CRH),
and
plumbing
giant
Ferguson
(FERG)
have
all
decided
to
leave
London
for
the
US.
Britvic
(BVIC),
the
drinks
company,
will
also
presumably
de-list
when
it
is
eventually
bought
out
by
Carlsberg
in
Denmark.
Travel
company
Tui
(TUI) has
also
de-listed
in
favour
of
Frankfurt.

But
the
biggest
kick
in
the
teeth
is
Arm
Holdings,
the
UK
chipmaker
whose

decision
to
list
on
the
US
Nasdaq
last
year
was
a
huge
disappointment
for
senior
British
politicians
keen
to
talk
up
London
as
a
centre
of
progress,
innovation
and
dealmaking.

And
if
they
look
at
the
US,
where
the
so-called

“magnificent
seven”
stocks
have
come
to
dominate
not
only
the
headlines
but
also
the
returns
investors
receive
in
their
stock
portfolios
and
funds,
they
can
only
add
envy
upon
injury.
And
there
is
your
answer.
This
isn’t
actually
really
about
retail
investors.
It’s
about
the
UK
economy,
gross
domestic
product
growth,
and
London’s
international
reputation
16
years
after
the
global
financial
crisis.

“Overall,
if
the
new
rules
allow
the
UK
to
grow
its
own
magnificent
seven
and
a
host
of
other
fast-growing
and
innovative
companies,
then
that
certainly
would
be
good
news
for
the
long-suffering
British
equity
investor
after
years
of
lacklustre
returns,”
Stewart
says.

“But
if
not,
then
the
rollback
of
important
shareholder
protections
should
give
investors
pause
for
thought.
The
checks
and
balances
provided
by
‘one
share
one
vote’
and
shareholder
approval
for
key
corporate
transactions
are
ultimately
there
to
protect
those
investors’
capital.”

In
conclusion,
then,
yes,
you
should
care.
But
more
to
the
point,
you
now
have
cause
to
be
should
be
careful.
Great
investing
insight
just
got
a
bit
more
valuable.

SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk