5th Jul 2021 13:41
(Alliance News) - The UK financial regulator on Monday outlined plans to consult on potential reforms to improve the effectiveness of UK primary markets.
"Recently, both the UK Listing Review, chaired by Jonathan Hill, and the Kalifa Review of UK FinTech have made specific recommendations for improvements to the regime," the UK Financial Conduct Authority noted.
The watchdog continued: "The FCA's suggested reforms seek to address, and build, on the proposals in these important reviews to ensure that the UK remains an attractive place to grow and list successful companies."
Among the measures includes allowing a targeted form of dual-class share structure within the premium listing segment. This, the FCA believes, will encourage "innovative, often founder-led companies" onto public markets sooner.
Such an A- and B-class structure was used by Deliveroo PLC in its London listing in March and was partly blamed for the poor reception for the company on its debut, when shares dropped by a quarter.
The FCA also is looking into reducing the amount of shares an issuer is required to have in public hands to 10% from 25%.
At the same time, the FCA wants to increase the minimum market capitalisation threshold for both the premium and standard listing segments for shares in ordinary commercial companies from GBP700,000 to GBP50 million, believing this "will give investors greater trust and clarity about the types of company with shares admitted to different markets".
"The FCA hopes its potential recommendations will reduce barriers to listing for companies and, as a consequence, increase the range of investment opportunities for consumers on UK public markets," it said.
Meanwhile, the regulator is proposing measures to ensure the listing regime continues to have "high standards of market integrity" and to simplify its rulebook.
Clare Cole, the FCA's director of Market Oversight, said: "Our proposals should result in a wider range of listings in the UK, and increased choice for investors while we continue to ensure appropriate levels of investor protection. They are intended to encourage high quality companies to list earlier, and so increase the possibility of a wider investor base being able to access growth in these companies."
The FCA is consulting for 10 weeks on the proposals with a closing date of September 14. The regulator is hoping to make a final decision by the end of 2021.
interactive investor Chief Executive Richard Wilson said the proposals set the "right mood music", but he does not feel they go far enough to protect retail shareholders.
"While a strong believer in the one share, one vote principle, the proposed changes -which were clearly signalled by Hill - seem to be suitably limited to very specific circumstances where votes can be leveraged, a sensible middle ground has been found. If this encourages more founder led, entrepreneurial businesses to come to market, then it's a win, even if 5 years of protected rights is a lifetime in fintech land," Wilson said.
He continued: "On free floats, there was always an option for FCA to consider listings where a proposed free float was below 25%. The rationale given seems sensible enough, but this is likely to be one of the policy changes which can only be judged, in terms of its impact on liquidity, in the fullness of time."
He noted, however, that there has not been any progress on retail IPO access.
"The government is making mood noises but if we're committed to accelerating UK economic development and competing on a global level as the home for the best companies, we need to engage ordinary shareholders - the retail investor. Sadly they are only referenced twice in this consultation," Wilson added.
Back in March, Hargreaves Lansdown CEO Chris Hill, AJ Bell CEO Andy Bell and ii's Wilson co-sent a letter to Jon Glen, economic secretary to the UK Treasury & City minister, calling on him "to consider the rights of retail shareholders in relation to IPOs".
The heads of the three companies wrote to Glen asked that he consider forcing companies to include retail offers in new flotations, as well as to open a wider consultation on the subject.
The letter pointed to "recent high-profile examples" of retail investors being excluded from the IPOs of online cards retailer Moonpig Group PLC, boot maker Dr Martens PLC and Hut Group owner THG PLC.
By Paul McGowan; [email protected]
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