Moves to boost U.K. listings by lowering corporate governance requirements and removing key safeguards could “undermine the U.K.’s reputation as a market with robust investor protection,” the Norwegian sovereign wealth fund warned the Financial Conduct Authority.
Norges Bank Investment Management, the in-house manager for the 15.77 trillion Norwegian kroner ($1.51 trillion) Government Pension Fund Global, Oslo, said in a letter to the FCA that, as an investor with 70% of its holdings in listed equities, “We share the interest in an effective and thriving listed sector.” It was responding to an FCA consultation looking at making the U.K. more attractive from a listings point of view, with suggestions including the wider introduction of dual-class share structures and the removal of a mandatory shareholder vote, which would be moved to a disclosure-based regime.
GPFG holds £78 billion ($100.3 billion) in U.K. equities.
While NBIM said it recognized the challenges that the U.K. and other markets have faced recently with regard to reduced initial public offering numbers, “We are concerned that the FCA’s efforts to boost listings by lowering corporate governance requirements will undermine the U.K.’s reputation as a market with robust investor protection, and might ultimately not be successful in driving companies’ IPO locations,” the letter said.
Executives at NBIM “are concerned about reforms to weaken investor protection driven by the aim to attract primary listings. As acknowledged by the FCA, there are many factors driving a company’s decision to list in a given market, including valuation and research coverage, the presence of a large pool of investors with deep expertise in certain sectors, and liquidity. We are unconvinced that corporate governance requirements are the key factor in determining where a company lists,” NBIM said, adding that consideration of the likelihood of achieving a higher valuation probably plays a relatively bigger role in decisions.
Investors will also be affected by cost increases under the proposals, by requiring more stringent monitoring and due diligence. The moves will also “hider stewardship efforts.”
The letter is signed by Carine Smith Ihenacho, chief governance officer, and Elisa Cencig, head of policy engagement.
The FCA envisages making any changes to listings rules in the second half of the year.
