Banking » Funding » Is the UK about to overhaul it’s 40-year old listing regime?

Is the UK about to overhaul it's 40-year old listing regime?

As early as this month, the UK’s financial regulator is expected to approve the most significant transformation of the country’s listing system in four decades.

This could lead to a potential announcement within weeks of a new government taking office.

According to reports from the Financial Times, sources familiar with the matter say the board of the Financial Conduct Authority (FCA) will convene on June 27 to make a decision on the final version of the rules, aimed at revitalising London’s struggling stock market.

Once officially confirmed, the changes will take effect after a two-week implementation period. However, the FCA is not expected to make any announcement until after the UK general election on July 4, and the exact timing has yet to be confirmed.

Some experts in the City anticipate the rules to be revealed in mid-July.

A broader swathe of changes on the horizon

These changes are part of a broader initiative to attract companies to list in the UK by easing regulatory requirements.

The FCA’s CEO Nikhil Rathi cautioned last week that these changes could create both opportunities and risks for companies seeking to list.

He stated that the proposed changes, which aim to facilitate companies’ entrance onto the London Stock Exchange, could expose the market and investors to a greater risk of “things going wrong”.

Speaking at the annual Investment Association conference, Rathi acknowledged that the FCA was embarking on potentially far-reaching reforms and emphasised the importance of accepting the potential for failure that comes with risk.

The FCA published a consultation in December on the new rules, which includes measures to expedite the listing process. As part of these plans, the FCA has suggested merging the premium and standard listing segments on the exchange, grouping all Main Market companies under one category.

The FCA has also highlighted potential risks, such as reduced scrutiny of corporate transactions like mergers and acquisitions, which could lead to a decline in shareholder value.

Additionally, the FCA has cautioned that encouraging a more diverse range of companies to list in the UK could open the door to higher-risk businesses. These reforms by the FCA are part of a broader effort to strengthen the London Stock Exchange, which has experienced a lack of initial public offerings (IPOs) and a series of take-private deals.

Companies like Cambridge-based chip designer Arm have opted to list in the US to access more extensive capital markets and higher valuations, instead of London. Some City advisers have welcomed the prospect of new listing rules, but some investors have expressed concerns about potential dilution of investor protection.

London Stock Exchange’s CEO Julia Hoggett has told bankers and stockbrokers recently that the new rules were the most significant reform of the UK’s primary market regime in 40 years, according to attendees.

She urged advisers to promote the new regime to encourage companies to list in London.

However, some attendees were sceptical, noting that at the same event a year ago, Hoggett had praised the IPO of WE Soda shortly before the Turkish-owned soda ash producer cancelled its flotation.

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