UK poised to approve biggest overhaul of listing regime in 40 years

The UK’s financial watchdog is poised to approve the biggest overhaul of the country’s listing regime in 40 years as early as this month, paving the way for a possible announcement within weeks of the formation of a new government. 

The Financial Conduct Authority’s board is set to meet on June 27 when it will decide whether to approve the final version of the rules, aimed at boosting London’s ailing stock market, people familiar with the matter told the Financial Times. 

Once confirmed publicly, the changes would take effect following a two-week implementation period. The FCA is not expected to make any announcement until after the July 4 election and the precise timing has yet to be confirmed. Some City advisers expect the rules to be unveiled in mid-July.

The changes are part of a wider effort to attract companies to float in the UK by easing regulatory requirements. FCA chief executive Nikhil Rathi warned last week that they would create “potential for failure” as well as “great opportunity” from companies seeking to list.

Rathi said the plans, aimed at making it easier for companies to join the London Stock Exchange, could leave the market, including investors, exposed to a greater risk of “more things going wrong”.

Speaking at the annual Investment Association conference, Rathi said under the new rules the FCA was “embarking on potentially very far-reaching reforms”.

“As we do that, we do need to accept that there is a risk of more things going wrong . . . acceptance that with risk comes great opportunity but also potential for failure . . . is important.”

The watchdog published a consultation on the new rules in December, including changes that would speed up the listing process.

As part of its plans, the FCA has suggested combining the premium and standard listing segments on the exchange, lumping all Main Market companies into one category.

The FCA has said that the risks would include less scrutiny of corporate transactions, such as mergers and acquisitions, meaning deals could “erode shareholder value”. It has also warned that encouraging a “more diverse range of companies to list in the UK” would open the door to higher-risk businesses.

The FCA reforms are part of a broader attempt to galvanise the LSE, which has suffered from a dearth of IPOs and a stream of take-private deals.

Companies such as Cambridge-based chip designer Arm have shunned London in favour of floating in the US to access deeper capital markets and higher valuations. FTSE 100 companies such as gambling group Flutter and building materials group CRH have opted to move their primary listings to New York.

The prospect of new listing rules has been welcomed by many City advisers. But some investors have aired concerns about the FCA’s proposals, warning that they would water down investor protection.

London Stock Exchange chief executive Julia Hoggett told bankers and stockbrokers at an event on Thursday night that the new rules were the biggest reform of the UK’s primary market regime in 40 years, according to people who attended.

She urged advisers to talk up the new regime to encourage companies to list in London, said attendees.

Some took the exhortation with a pinch of salt, with one noting that at the same event 12 months ago Hoggett had “heralded” the IPO of WE Soda just days before the Turkish-owned soda ash producer cancelled its flotation.