The UK plans to simplify the rules around listing businesses in London to compete with overseas markets.
Regulator the Financial Conduct Authority revealed plans to attract a wider range of companies after seeing listings in the UK fall by 40% since 2008. They include creating only one listing segment in place of the existing standard and premium segments.
Under current rules, businesses seeking entry to the FTSE indexes must hold a premium listing, comply with extremely high standards of regulation and pay substantial costs.
The situation has come to the fore in recent months as the government sought to convince Arm to list in London. The Cambridge-headquartered chipmaker, which was listed in London and New York when it was bought by Japan鈥檚 SoftBank Group Corp in 2016 in a deal worth 拢23.4 billion, has this time chosen to list solely on New York鈥檚 Nasdaq.
However the new rules mean shareholders will lose the right to vote on acquisitions.
鈥淭he decision by a firm to list is based on many more factors than regulation alone, such as taxation and the availability of capital,鈥� said the FCA.
鈥淗owever, the listing regime in the UK has been seen by some issuers and advisers as too complicated and onerous.
鈥淭his is why the FCA is proposing significant changes to the listing rulebook, including replacing its existing 鈥榮tandard鈥� and 鈥榩remium鈥� listing segments with a single category for equity shares in commercial companies.鈥�
A single equity category would remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies pursuing their business strategies, the FCA said.
鈥淟ondon is a major international market with a deservedly good reputation globally among companies aiming to raise capital,鈥� said FCA chief executive Nikhil Rathi.
鈥淥ur 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.
鈥淲hile regulation plays an important part, a company鈥檚 decision on whether, and where to list, is influenced by many factors so substantive change will require a concerted effort from government and industry as well.
鈥淲e want to encourage more companies to list and grow in the UK, versus other highly competitive international markets.鈥�
Karen McCormick, chief investment officer, at trans-Atlantic investor Beringea, told BBC Radio 4’s Today programme: 鈥淚 think the proposed changes are helpful.
“Anything that makes it easier for a company to list in the UK is useful, but it is one component that – in isolation – isn鈥檛 going to change the game. There are a number of factors, such as the higher valuations that can be achieved in the US, that must be considered.鈥�
The FCA has also published rule changes to improve how equity secondary markets operate which it says support its commitment for transparency in equity markets.