As concerns rise over London’s ability to compete with New York and other Asian hubs after capital markets de-energize, regulators are proposing “significant changes to IPO rules” to make the city more attractive.
The Financial Conduct Authority (FCA) wants to replace the top and standard IPO categories with a single offer in an effort to attract more companies, according to a statement released on Tuesday.
The FCA said the changes would make UK IPOs leaner. It is evaluated that owning two classes of shares preferred by some entrepreneurs who want to retain control of their businesses even after going public will make it easier for companies and remove mandatory shareholder votes, including acquisitions.
While the new draft came after the dramatic decline in the number of new IPOs in London and other companies moving their shares to New York, this situation raised concerns about whether the UK could maintain its place as one of the world’s largest financial centers after Brexit.
“Reducing the rules could reduce investor protection”
The FCA said any reduction in the rules would reduce investor protection, and this requires broader public discussion.
“The reforms we propose will significantly rebalance the regulatory burden for the benefit of publicly traded companies and investors who want to set their own risk appetite and participation requirements,” Nikhil Rathi, FCA’s chief executive officer, said in a statement on Tuesday.
After Jonathan Hill’s 2021 IPO review, the FCA implemented a number of reforms, including lowering the required amount of publicly traded shares and allowing some classes of binary shares.
The agency has launched a new consultation by June 28 to potentially eliminate the overheads associated with a top listing that has historically made companies eligible for inclusion in FTSE indices. Implementation of the decisions to be taken as a result of the talks will take place late this year or early 2024.
“If implemented, London can compete with its rivals”
“If implemented, London can keep up with its international rivals. I agree we definitely need a broader discussion about risk and growth,” Hill said in a statement.
In a speech at the Global Investment Management Summit in London in March, Rathi said many parties should be asked politically and culturally questions about whether they are comfortable moving to a system based on disclosure rather than detailed rules.
“If we go this route, it will have to be a clear admission that some investors, including those who read and understand every word of the notices, will lose money. When these events occur, there is no compensation for investors who have suffered losses due to regulatory failures,” Rathi said.
Rathi’s comments came amid a heated debate about London’s future. Cambridge-based tech firm Arm Ltd.’s decision to go public in New York after considering a world-class bilateral IPO in both the UK and the US is that the FCA has not relaxed its related-party trading rules (a case Arm has reportedly requested). led to criticism.
Dublin-based CRH Plc, one of Europe’s largest building materials companies, moved its main listing registration from the UK to New York, while bookmaker Flutter Entertainment Plc said last week it received shareholder support to continue an additional US listing.
Still, Deutsche Bank AG’s decision to buy London-based broker Numis, announced on Friday, was seen as a vote of confidence for London’s long-term future.
Rathi’s comments come at a time of increasing pressure on the government to reform the UK’s pension arrangements to make it easier for hundreds of billions of pounds in pension savings to be invested in British companies. While there is widespread support for these changes, concerns remain about the potential risks to pension funds.