The Financial Conduct Authority (FCA) has issued a consultation paper outlining plans to make listing on the country’s stock exchanges easier for companies which have increasingly opted for US exchanges.
Proposals include the scrapping of the “primary listing” category of listed company, a mark of quality regarded for decades as a gold standard for governance, disclosure and transparency by many investors.
The UK regulator also bowed to pressure and has made concessions that enable founders of newly floated companies to retain more power by allowing different share classes with differing voting arrangements.
In addition, it is recommending removing rules requiring so-called related party transactions to be put to the vote of all shareholders.
This — a restriction said to have prompted SoftBank to opt for New York over London for its listing of Arm Holdings.
Other proposals include removing the requirement for companies to show a three-year financial track record before listing — an obstacle seen as preventing promising start-ups from being able to float.
It also plans to get of the requirement for listed companies making acquisitions bigger than 25% of their own market value to put the deal to a shareholder vote.
The recent decision by Arm, the chip designer, to opt for New York over London was seen as a wake up call that reforms were needed.
Other FTSE 100 companies including Ferguson, formerly Wolseley, and CRH, the building materials group, have also moved or are moving.
Nikhil Rathi, chief executive of the FCA, said the reforms would give investors access to a wider range of companies and help create jobs and wealth. However, he added: “We must be upfront that these changes . . . will mean passing greater investment risk to investors and greater responsibility on to shareholders to hold the companies they own to account.”
Rathi said that UK listings had reduced by 40 per cent since 2008, with the rules regarded by some as too onerous and complicated.
One earlier proposal that listed companies concerned about the dropping of “primary listing” status could opt in to supplementary obligations has been dropped. It is widely accepted that standard listings carry a stigma that the FCA wants eradicated.
The reforms were partly inspired by reviews into listings by Ron Kalifa, the former Worldpay chief, and Lord Hill, the ex-EU commissioner, and come on top of policy changes in late 2021 that favoured tech company founders, including allowing share market debutants smaller free float requirements.
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