Monday 05 July 2021 1:30 pm | Updated: Monday 05 July 2021 2:19 pm

FCA begins listing rules consultation in bid to lure more fintechs to IPO in London

The UK’s City watchdog has launched a wide-ranging consultation to improve the effectiveness of Britain’s financial markets, it announced today.

The consultation has been opened by the Financial Conduct Authority in response to changes put forward by Lord Jonathan Hill in the UK Listing Review and the Kalifa Review of UK FinTech to the country’s primary market regime.

The FCA is seeking feedback from firms on several proposed reforms intended to strengthen the UK primary markets regime and build on the reforms recommended in the two reviews.

After the trio of reviews and consultations, the Government hopes any relaxation in regulations will attract more fintechs and high-growth businesses to IPO on the London stock market.

One of these changes includes “allowing a targeted form of dual class share structures within the premium listing segment” the organisations said. This change is designed to bolster incentives for innovative founder-led companies to list on UK markets sooner.

Dual class share structures work by offering two separate sets of shares, one to the general public which typically have limited to no voting rights, and another set which is retained by founders and executives that have greater weighting in voting processes.

The greater power dual class share structures give to company-founders allows them to exert more control over the direction of the company, which should encourage them to list on UK exchanges.

The FCA also said it was recommending reducing the amount of shares an issuer is required to have in public hands from 25 per cent to 10 per cent, in a move designed to weaken barriers for issuers created by the current regime.

Claire Keast-Butler, a partner at law firm Cooley, says: “Allowing dual-class share structures on the premium segment of the London Stock Exchange and lowering the free float requirement are likely to make London more attractive to many home-grown high-growth technology companies that may otherwise choose to list in the United States.”

Some experts have criticised the proposals for failing to address problems around poor market access for retail investors.

Richard Wilson, CEO of interactive investor, says: “The hard truth is that we haven’t seen any progress on retail IPO access.”

“The government is making mood noises but if we’re committed to accelerating UK economic development and competing on a global level as the home for the best companies, we need to engage ordinary shareholders – the retail investor. Sadly they are only referenced twice in this consultation.”

Other measures the FCA is consulting on include expanding the minimum market capitalisation threshold for both the premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £50m.

The organisation also said they are suggesting making minor changes to the Listing Rules, Disclosure Guidance and Transparency Rules and the Prospectus Regulation Rules to simplify the FCA’s rulebooks and reflect changes in technology and market practices.

Clare Cole, director of market oversight at the FCA, says: “Effective public markets are critical in enabling companies to finance their businesses, which in turn creates growth and jobs for the UK economy.”

“These proposals are essential if we intend for the UK to continue to be a modern and dynamic market. Today, we are acting assertively to meet the needs of an evolving marketplace.”

“Our proposals should result in a wider range of listings in the UK, and increased choice for investors while we continue to ensure appropriate levels of investor protection. They are intended to encourage high quality companies to list earlier, and so increase the possibility of a wider investor base being able to access growth in these companies.”

In a statement, Lord Hill said: “Our Review emphasised the importance of making London more competitive and of constructing a more agile regulatory system, so I welcome the FCA moving swiftly to consult on more of our recommendations.”

“Coming after the Treasury’s announcement last week about the reform of the Prospectus regime, it is good to see momentum building to improve London’s attractiveness as a place to list.”

The consultation will last for 10 weeks and will close on 14 September. The FCA will seek to implement the changes before the end of the year.

The announcement comes as London recorded its best opening six months for IPOs and fundraising for seven years.

49 IPOs raised over £9bn in the first six months of 2021, the highest volume of floatations since the first sixth months of 2017 and the most amount raised in initial offerings since the first half of 2014.