In a bid to revitalise the UK’s equity markets by making them more attractive and competitive globally, the Financial Conduct Authority (FCA) has announced the biggest reform of London’s stock market listing rules in 30 years.
The City regulator’s decision to loosen regulations regarding shareholder rights and information disclosures is aimed at making the UK’s regime more in line with international standards.
The change is seen as necessary to counter the growing number of companies opting for listings in other markets. This was acutely demonstrated in 2023, with the high-profile loss of chip designer Arm Holdings to Wall Street. The shift away from London was widely seen as a marker of the City’s declining appeal to technology and high-growth businesses.
Central to the reform is the simplification of listings. The FCA plans to remove “premium” and “standard” listings and replace them with a single category. The change is designed to simplify the process and make it easier for a broader range of companies to issue shares on UK exchanges. There will also be greater flexibility around enhanced voting rights, which are often held by founders of a company, which can cause conflict with shareholders.
As the Times reports in a feature on the Stock Market listing shakeup, the reforms will be applied from July 29, and follow two consultations made by the FCA last year.
The announcement has also had approval from the new government. Chancellor Rachel Reeves hailed these changes as a significant step towards rejuvenating the UK’s capital markets. She stated that these reforms would bring the UK in line with its international counterparts, thereby attracting the most innovative companies to list in London.
Nikhil Rathi, Chief Executive of the FCA, and Sarah Pritchard, its Executive Director for Markets and International, said that the reform is essential to prevent the UK’s regime from falling out of step with other jurisdictions, which could deter companies from choosing the UK as a listing destination.
But not everyone is convinced that these changes will have a positive impact. A number of pension schemes, asset managers, and trade associations have expressed concern that the new rules may undermine investors’ ability to hold company boards accountable.
Railpen, which represents 350,000 railway workers, and the People’s Partnership, with millions of auto-enrolled pension members, are among the groups that have raised caution about the potential risks.
Acknowledging the concerns, the FCA admitted that the new rules involve allowing greater risk. Rathi noted that the reforms might necessitate a change in how investors engage with companies, utilising shareholder rights and other mechanisms to scrutinise business strategies and boards more effectively.
Despite the concerns, there is hope that the reforms will attract a more diverse array of companies to Britain. While the FCA’s reforms aim to breathe new life into London’s equity markets by attracting more diverse and innovative companies, the potential risks and broader impacts of these changes will need careful monitoring.