UK Listing Reforms: FCA asks investors to embrace greater risk

Last week, the Financial Conduct Authority (FCA) published a further consultation paper, CP 23/10, setting out proposals to make the UK public markets a more attractive and trusted place to list companies.

CP23/10 takes a very clear position: the current listing regime is too onerous and restrictive. In the FCA’s view, to entice companies on to the UK public markets, the rules need to provide more flexibility and investors must be willing to take on greater investment risk and responsibility in holding companies to account. The reforms are radical and represent a fundamental shift in approach from the FCA away from prescriptive rules to a disclosure-based regime.

The FCA recognises that changing the listing regime is not a cure-all to the current lethargy in the UK capital markets, but as other global exchanges are becoming more competitive, the FCA is focussed on ensuring the UK listing regime does not serve as a reason for companies to shy away from London.

Reform will take time but the FCA anticipates substantial progress will be made by the end of 2023. Further details on the reforms, including areas not covered by CP 23/10 will be fleshed out in another consultation paper due in the autumn. The consultation closes on 28 June.

Summary of key changes

Key changes proposed by CP 23/10 include:

• a single listing segment with categories for different types of companies and securities
• no requirement for shareholder approval for significant transactions (other than reverse takeovers) or related party transactions (RPTs)
• a more permissive regime for dual class share structures (DCSSs)
• removal of certain premium listing eligibility requirements, including the 3-year track record and clean working capital statement, as well as modified requirements around control and independence eligibility requirements
• modified requirements around controlling shareholders with a “comply or explain” and disclosure regime
• a reduced role for Listing Rule sponsors after IPO