The
Financial
Conduct
Authority
(FCA)
will
proceed
with
a
significant
overhaul
of
the
UK’s
listing
regime,
with
new
rules
coming
into
force
by
the
end
of
this
month.
In
a
statement
this
morning,
the
City
watchdog
said
the
rules,
which
will
result
in
a
single
“streamlined”
categorisation
for
companies
seeking
to
publicly
sell
their
shares
in
the
UK,
would
be
the
biggest
changes
made
to
the
regime
in
over
three
decades.
“A
thriving
capital
market
is
vital
in
delivering
investment
to
growing
companies
plus
returns
and
choice
to
investors,”
the
FCA’s
executive
director
for
markets
and
international
Sarah
Pritchard
said.
“That’s
why
we
are
acting
to
make
it
more
straightforward
for
those
seeking
to
list
in
the
UK,
while
retaining
vital
protections
so
investors
can
help
steer
the
businesses
they
co-own.”
The
news
comes
amid
disquiet
over
the
apparent
“shrinking”
of
the
UK’s
public
equity
markets,
as
larger
companies
buy
up
smaller
ones,
and
companies
looking
for
an
initial
public
offering
(IPO)
swerve
London
for
markets
overseas.
According
to
the
UK
Listing
Review,
the
number
of
listed
companies
in
the
UK
has
fallen
by
around
40%
from
its
peak
in
2008.
Between
2015
and
2020,
the
UK
accounted
for
just
5%
of
all
initial
public
offerings
globally.
And
the
trend
appears
to
be
continuing.
At
the
start
of
this
week,
drinks
manufacturer
Britvic
(BVIC),
which
is
a
FTSE
250
constituent,
announced
it
had
accepted
a
buyout
offer
from
Carlsberg.
The
move
would
mean
Britvic
de-lists
from
the
London
Stock
Exchange.
But
politicians
of
all
stripes
have
also
expressed
quiet
concern
that
London
is
also
not
attracting
as
many
new
entrants
to
the
market
too,
following
high-profile
companies
like
chipmaker
Arm
Holdings
choosing
New
York
for
their
listings.
The
news
that
fast
fashion
company
Shein
will
list
in
London
did
something
to
quell
the
discomfort,
but
the
UK
is
yet
to
play
host
to
a
technology
listing
that
delivers
for
investors
in
the
long
term.
Just
days
into
her
role
as
the
UK’s
new
chancellor
of
the
exchequer,
Rachel
Reeves
said
the
changes
were
a
“significant
first
step”.
“The
financial
services
sector
is
central
to
the
UK
economy,
and
at
the
heart
of
this
government’s
growth
mission,”
she
said.
“These
new
rules
represent
a
significant
first
step
towards
reinvigorating
our
capital
markets,
bringing
the
UK
in
line
with
international
counterparts
and
ensuring
we
attract
the
most
innovative
companies
to
list
here.”
The
new
rules
will
take
effect
on
29
July
2024,
following
a
short
implementation
period.
How
Will
The
New
Regime
Work?
The
proposals
are
complicated,
but
they
can
be
condensed
down
to
the
following:
1.
The
FCA
is
sticking
with
its
proposal
to
simplify
the
listing
regime.
This
will
involve
a
single
listing
category
and
“streamlined”
eligibility
requirements
to
make
things
simpler
for
listees;
2.
The
UK
will
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.”
The
existing
regime
means
corporate
actions
are
put
to
mandatory
votes,
long
seen
as
a
key
feature
of
the
UK’s
global
reputation
for
corporate
governance.
However,
the
FCA
agrees
they
can
also
present
stumbling
blocks.
Instead,
“significant
transactions”
and
“related-party”
transactions
will
now
be
subject
to
official
disclosures
to
allow
investors
to
make
up
their
own
minds
in
a
different
way.
Shareholder
approval
for
reverse
takeovers
and
de-listing
will
remain.
How
Have
Investors
Responded
to
the
New
Regime?
When
the
FCA
initially
announced
its
proposals
in
December
last
year,
there
was
some
concern
the
proposed
rules
would
result
in
a
dilution
of
standards.
Indeed,
in
an
interview
with
Morningstar.co.uk
in
January
this
year,
now-outgoing
Witan
Investment
Trust
chief
executive
Andrew
Bell
said
the
FCA
should
be
careful
not
to
“throw
the
baby
out
with
the
bathwater” in
its
efforts
to
make
the
UK
a
more
attractive
place
to
invest.
“One
of
the
reasons
a
lot
of
foreign
companies
wanted
to
list
in
the
UK
was
because
it
had
a
respected
set
of
requirements
in
order
to
be
listed,”
he
said
at
the
time.
“And
there
was
a
quality
threshold.
And
so,
if
you
abolished
the
quite
quality
threshold,
the
danger
is
you’re
going
to
end
up
with
lots
of
poor-quality
companies
coming
along,
or
the
market
gets
poorly
rated
because
people
think,
well,
I
don’t
trust
the
accounts.”
Today,
concerns
remain,
despite
the
largely
positive
reception.
Chris
Beckett,
head
of
equity
research
at
Quilter
Cheviot,
agreed
the
reforms
were
an
important
move,
but
highlighted
the
risk
that
governance
standards
might
fall.
“Finally,
while
these
reforms
are
a
good,
albeit
limited,
first
step,
we
need
to
be
careful
not
to
lower
standards
too
much,”
he
said.
“Encouraging
businesses
to
list
here
is
beneficial,
and
we
hope
these
reforms
will
help,
despite
reservations.
However,
attracting
high
quality
companies
requires
maintaining
robust
governance
standards.
Given
the
FCA’s
mandate
and
actions
to
date,
it
fully
understands
the
need
to
protect
those
standards.”
One
fund
manager
said
it
will
take
more
than
a
listings
overhaul
to
solve
the
UK’s
capital
markets
conundrum,
however.
“These
changes
should
be
welcomed,
as
they
will
with
other
recent
changes
(the
British
ISA,
for
example)
increase
the
attractiveness
of
the
UK
equity
market,”
said
James
Lowen,
senior
fund
manager
of
the
Morningstar
Silver-Rated
JO
Hambro
Capital
Management
UK
Equity
Income
fund.
“However,
the
changes
to
date
have
been
incremental,
and
more
will
need
to
be
done
–
for
example,
mandated
domestic
allocations
for
pensions
funds,
the
removal
of
stamp
duty
–
to
fully
restore
the
UK
market
competitiveness
on
the
world
stage
and
remove
the
material
valuation
discount
the
UK
trades
on.”
As
much
was
acknowledged
by
the
FCA
in
its
announcement.
“Regulation
is
only
part
of
the
answer
in
helping
the
UK
achieve
sustainable
growth,”
Pritchard
said.
“Other
factors
play
a
significant
role
in
influencing
where
a
company
decides
to
list.
We’re
committed
to
continually
working
together
with
all
those
who
have
a
part
to
play
in
supporting
a
thriving
UK
capital
market
and
thank
everyone
who
has
contributed
to
this
work
so
far.”
With
additional
reporting
by
James
Gard
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