The Financial Conduct Authority’s (FCA) new rules for the listing of shares have come under fire from leading asset owners.
The regulator has simplified the listings regime with a single category and streamlined eligibility for those companies seeking to list their shares in the UK.
The overhaul of listing rules, according to the FCA, “better aligns the UK’s regime with international market standards”.
The rules, noted the FCA, “ensure investors will have the information they need to make decisions about their money, while maintaining appropriate investor protections to hold the management of the companies they co-own to account”.
The new rules remove the need for votes on significant or related-party transactions and offer flexibility around enhanced voting rights.
Shareholder approval for key events, like reverse takeovers and decisions to take the company’s shares off an exchange, is still required.
But leading asset owners have called into question the validity of the move.
Adam Matthews, chief responsible investment officer at the Church of England pensions board, asked: “In whose interest are the weakening of the UK listings rules announced this morning by the Financial Conduct Authority serving?”
He then added: “In the executive summary [of the FCA’s new rules] there is some acknowledgement ‘that not all parts of the market will agree with certain features of the final rules for commercial companies’ – a mild understatement of the opposition from the part of the market serving the long-term interests of many millions of pension fund members.”
Similarly, Caroline Escott, acting head of sustainable ownership at Railpen, expressed her disappointment with the new rules. “UK pension schemes naturally want thriving UK capital markets. As such, we are deeply disappointed with the final UK listing rules and feel an opportunity has been lost to truly make UK capital markets an environment where all the parties necessary to creating long-term value can co-operate and have a voice,” she said.
She also said: “We presented compelling evidence in support of the benefits of robust investor protections, both to the UK as a global financial centre, and to outcomes for everyday savers. It is a shame that this evidence, and the widely held concerns of investors and consumer representatives, have not been heeded.”
She did note though that she was pleased the FCA is “open to our suggestion” of class-by-class vote disclosure at companies with dual-class share structures.
“The methodology for doing so will need to be carefully considered, and we look forward to working with the FCA and others on this,” Escott said.
The FCA has been clear that the new rules involve allowing greater risk, but believes the changes set out will better reflect the risk appetite the economy needs to achieve growth.
The new rules will apply from 29 July 2024.
In what could be her first misstep as chancellor of the exchequer, at least in the eyes of some asset owners, Rachel Reeves said: “These new rules 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.”
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