Investors will be expected to take on great financial risk under the UK Financial Conduct Authority (FCA)’s strategy to revigorate London’s struggling capital markets.
The FCA reiterated today its proposed streamlining of the UK’s Premium and Standard listing requirements to make it easier for companies to float.
Premium listings are currently required to meet the UK’s ‘super equivalent rules’ which set higher requirements than Standard listings.
Among other rules, Premium listings have stricter requirements on financial and working capital disclosure, require a pre-admission sponsor to assist with the flotation and have higher pre-emption rights requirements.
The FCA made these recommendations in a 2021 policy statement:
- a targeted form of dual-class shares structure (DCSS)
- a reduced level of shares required to be in public hands at listing to 10% from the
- the current requirement of 25%
- an increased minimum market capitalisation threshold for listing to £30 million, for shares in companies other than funds
- minor modernisation to the Listing Rules, Disclosure Guidance and Transparency
- Rules (DTRs), and Prospectus Regulation Rules (PRR)
Feedback on proposals is ongoing, but it seems clear that investors will have greater individual responsibility for conducting due diligence under what the FCA is calling a disclosure-based regime.
“The proposals could entail an increased possibility of failures, but the changes set out would better reflect the risk appetite the economy needs to achieve growth,” said the FCA.
The FCA has also proposed a ‘bond market consolidate tape’ to provide faster and more transparent pricing data for participants in the UK’s world-class bond market.
With a better system in place for establishing fair bond prices, brokers will theoretically have greater accountability for the prices they offer, which will result in improved competition.
Sarah Pritchard, executive director of markets and international at the FCA said: “We are working to strengthen the attractiveness of UK capital markets and supporting UK competitiveness and growth.
“As we do so, it is important that others consider what they in turn can do, to make sure the UK remains an attractive place for companies to raise capital.
“We welcome feedback on our detailed proposals to make sure that we have the balance right as we seek to set the standards for the years and decades ahead.
'The UK is a world leader for bond and derivative markets, and we want to make it better by ensuring investors have access to better, quicker, clearer and cheaper data.”
Bim Afolami, economic secretary to the Treasury, stated: “The UK is Europe’s leading hub for investment but it’s a competitive world and we are by no means complacent.
“We want to make the UK the global capital for capital, attracting the brightest and best companies in the world.
“We are strengthening the UK as a listing destination, taking forward reforms to make it quicker to list, improve disclosure and make our capital markets more efficient and open.”