FCA unveils biggest listings shake-up in 30 years

London and financial services
London has been losing out to competitors (pic: Terry Murden)

City watchdogs have announced plans to put more power in the hands of investors and help London’s equity market retain its competitiveness in the biggest change in the listing rules for three decades.

The Financial Conduct Authority wants to encourage more companies seek a public listing on the London Stock Exchange amid concern that it is losing out to rivals, particularly New York.

Chip designer Arm Holdings’ decision to move to Wall Street last year was regarded as a key example of London losing its appeal to technology and high-growth businesses.

The FCA is looking to ease and simplify the rules around listings to help reinvigorate the market. Companies will be able to float without the need for an extensive financial track record.

It is hoped that the changes will encourage more flotations in areas such as Scotland which have seen their stock of publicly listed companies dwindle in recent years. Scotland has lost a number of firms to takeover, including Aggreko and Stagecoach, and Wood Group is currently subject to a possible bid. Smaller firms, including Chris van der Kuyl’s Parsley Box decided to return to private ownership.

James Ashton of the Quoted Companies Alliance, who recently gave a presentation in Edinburgh, said the changes have been a long time coming and reflect the need to address the mobility of finance.

The reforms, which come into effect on 24 July, follow two FCA consultations last year and are supported by the new Chancellor Rachel Reeves.

She said the changes “represent a significant first step towards reinvigorating our capital markets, bringing the UK in line with international counterparts and ensuring we attract the most innovative companies to list here”.

The City regulator acknowledged that the new rules “involve allowing greater risk” amid warnings that they could lead to more stock market failures.

Chris Van Der Kuyl
Chris van der Kuyl’s Parsley Box returned to private ownership after a difficult time on AIM

Dan Coatsworth, investment analyst at AJ Bell, said: “The government is clearly desperate to bolster UK listings as part of efforts to revitalise the City of London. However, the regulator’s plans to loosen existing rules come with some serious potential negatives.

“The FCA’s reforms risk diluting the quality of the UK stock market to a house made out of balsa wood. This includes giving shareholders less of a voice on matters like acquisitions even though they are a company’s owners.

“It’s important to make the UK market a more attractive place for investors with greater choice, particularly in sectors like technology which are under-represented on the London Stock Exchange versus the US.

“However, the worst thing the FCA can do is open the floodgates and let in any Tom, Dick or Harry onto the UK market.

“It feels as if the listing reforms could make the UK market a riskier place for investors if we get a wave of companies of questionable quality taking advantage of the relaxed rules and listing in London.

“The FCA even says in its report that access to a wider range of companies may result in increased risk of exposure to individual company failure. Ultimately, the reforms will put a greater onus on investors to do thorough research before making an investment.

“The junior AIM market in the UK took a long time to shake off its negative reputation as being the ‘Wild West’ for investors, and we certainly don’t want to see a similar tag slapped on London’s Main Market.”

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