The UK’s FCA said today it would be enhancing the listing regimes for UK IPOs as it seeks to respond to the loss of some marquee IPOs to other exchanges. The proposals aimed at making the UK’s listing regime more accessible, effective, and competitive.
Following consultation, the FCA has kept the suggested change to a single listing category, with streamlined eligibility and ongoing requirements. In today’s proposals, there is also the suggestion of moving to a disclosure-based regime – one that puts sufficient information in the hands of investors, so they can influence company behaviour and decide how they want to invest.
The FCA said: the proposals could entail an increased possibility of failures, but they aim to better reflect the risk appetite the economy needs to achieve growth. The regulator now wants to hear from all sides of the market on the detailed proposals before a decision is made on the final rules.
“We are working to strengthen the attractiveness of UK capital markets and supporting UK competitiveness and growth,” said Sarah Pritchard, Executive Director for Markets at the FCA. “As we do so, it is important that others consider what they in turn can do, to make sure the UK remains an attractive place for companies to raise capital. We welcome feedback on our detailed proposals to make sure that we have the balance right as we seek to set the standards for the years and decades ahead.”
IPO listings regime in the UK too onerous and expensive
The Armchair Trader has been repeatedly told by both CEOs and brokers in the UK, and importantly, overseas, that the listings regime in the UK is too onerous and too expensive. This is prompting companies to not only favour New York, which provides the added fillip of access to the much larger domestic US market, but also for smaller companies, alternatives like Frankfurt and Milan.
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The proposals were being cautiously welcomed by the broker community on Wednesday afternoon.
“Hargreaves Lansdown looks after £50bn invested directly into equities on our platform, with around 80% of trades taking place on the London markets,” said Tom Lee, head of trading proposition at the UK wealth management giant. “A successful listings regime which supports our home market is essential. However, 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.”
He added that he was 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, Lee said.
Hargreaves Lansdown is 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,” said Lee. “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. Building an understanding of how investment plays a part in long-term financial resilience is essential.”
