Is the FCA Diluting Investor Protections?

The
proposals
are
complicated
and
will
be
explained
more
in
future
articles.
But
they
can
be
condensed
down
to:

With
the
aim
of
encouraging
a
greater
range
of
companies
to
list
in
the
UK,
the
FCA
is
sticking
with
its
proposal
to
simplify
the
listing
regime.
This
will
involve
a
single
listing
category
and
“streamlined”
eligibility
requirements
(ie.
less
onerous
for
the
listing
company)

Moving
to
a
“disclosure-based
regime”,
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,
but
this
will
change
to

disclosure
for
“significant
transactions”
and
related
party
transactions.
Shareholder
approval
for
reverse
takeovers
and
de-listing
will
remain.
Mandatory
votes
are
seen
as
a
stumbling
block
to
regulators
but
are
a
key
feature
of
the
UK’s
global
reputation
for
corporate
governance.

Industry
Reaction

But
there
was
immediate
pushback
from
the
industry
on
this
issue.
Tom
Lee,
head
of
trading
proposition,
Hargreaves
Lansdown
saod:
“Making
the
UK
an
attractive
place
to
list
has
to
be
balanced
with
rights
for
shareholders
and
ensuring
that
the
quality
of
the
market
is
not
diluted.
We
are
therefore
concerned
that
the
FCA
is
pushing
forward
proposals
that
do
not
allow
for
shareholder
votes
on
significant
and
related
party
transactions. 
The
plans
to
have
no
mandatory
sunset
clause
on
dual
class
share
structures
has
the
potential
to
create
a
permanent
two-tier
share
structure
which
is
not
welcome.”

This
theme
was
taken
up
by
Galina
Dimitrova,
director
for
Investment
and
Capital
Markets
at
the
Investment
Association:

“It
is
important
that
the
reforms
strike
the
right
balance
between
risk
and
investor
protections,
so
that
the
UK
can
attract
and
retain
innovative
companies.
This
in
turn
will
provide sustainable economic
growth
and
long-term
returns
for
our
clients.” 

In
November’s
Autumn
Statement,
the
chancellor
tweaked
some
ISA
reules
but
disappointed
some
in
the
industry
by
backing
away
from
a
“British
ISA”
designed
to
attract
capital
to
domestic
companies.
This
was
odd
in
the
context
of
Jeremy
Hunt’s
deliberate
echoing
of
the
“Tell
Sid”
privatisation
wave
in
the
1980s,
which
generated
private
investor
interest
in
the
stock
market.

Hargreaves
Landsdown’s
Tom
Lee
thinks
the
FCA’s
proposals
missed
an
opportunity
to
support
domestic
retail
investors:

“We
are
also
disappointed
that
the
opportunity
to
boost
retail
access
to
IPOs
was
not
taken
with
this
review
of
listings
rules. 
It
is
therefore
essential
that
the
forthcoming
review
of
the
prospectus
regime
in
2024,
puts
improving
retail
investors’
rights
at
its
heart. 
The
regime
cannot
continue
to
be
the
barrier
to
retail
investment
which
it
is
today. 
Boosting
retail
investment
on
the
stock
exchange
will
have
wider
market
benefits
providing
depth
and
liquidity,
as
well
as
boosting
interest
in
investment
with
the
wider
public,
unlocking
further
capital
for
UK-listed
companies.”

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