The U.K.'s financial regulator on Tuesday floated reforms aimed at encouraging more companies to list on the London Stock Exchange by making listing rules easier and encouraging more disclosure.
The Financial Conduct Authority said in a news release that it wants to make listing rules "more effective, easier to understand and more competitive" and acknowledged that some issuers and advisers viewed the U.K. listing regime as "too complicated and onerous."
Reforming the listing rules began after the U.K. left the European Union in 2021, but listings have been declining since 2008, dropping by 40% since then, according to the U.K. Listing Review.
The FCA is proposing a single category for equity shares in commercial companies, instead of the current standard and premium listing categories, among other changes. Having a single category would remove some current deterrents for early stage companies, the FCA said. It is also proposing to do away with mandatory shareholder votes on acquisitions and similar transactions and "be more permissive on dual class share structures."
The regulator also wants to increase transparency for investors and more oversight for listing companies to ensure they can meet listing standards.
Changes to rules for equity secondary markets will also be proposed, the FCA said in the release.
While the proposed reforms gather feedback, the FCA called for "an open discussion about the change to risk appetite that a listing regime based on disclosure and engagement, rather than regulatory rules, would require."
Nikhil Rathi, chief executive of the FCA, said in the release that the proposed reforms "would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement." In a speech at a March investment summit, Mr. Rathi said that London has grown faster in other asset classes including fixed income, currency and commodities.
Anne Fairweather, head of government affairs and public policy for financial services firm Hargreaves Lansdown said in an email that some of proposed reforms are welcome, including the focus on investor engagement and disclosure "rather than the reams of paper in a prospectus which aren't read."
But Ms. Fairweather also cautioned that the changes need to help retail investors better understand the companies they invest in and protect existing investors during secondary fund raisings. One concern is that removing investors' rights with the proposal to no longer mandate shareholder votes on acquisitions could impact investment decisions as well as the listed company's desire to make changes, and "we look forward to considering how these needs are balanced in the proposals," Ms. Fairweather said.
