The UK Financial Conduct Authority (FCA) today launched a consultation on a series of proposed reforms to improve the effectiveness of UK primary markets.
The changes aim to reduce barriers to listing for companies and, as a consequence, increase the range of investment opportunities for consumers on UK public markets. The FCA is also proposing measures to ensure the listing regime continues to have high standards of market integrity and to simplify its rulebook.
The FCA’s proposals published today respond to the changing nature of companies coming to market. They aim to broaden investor access to companies in higher growth sectors by improving flexibility and accessibility in the FCA’s listing regime as a gateway to the UK’s main public markets.
The regulator is consulting on the following measures:
- Allowing a targeted form of dual class share structures within the premium listing segment to encourage innovative, often founder-led companies onto public markets sooner, and so broaden the listed investment landscape for investors in the UK.
- Reducing the amount of shares an issuer is required to have in public hands (i.e. free float) from 25% to 10%, reducing potential barriers for issuers created by current requirements.
- Increasing the minimum market capitalisation (MMC) threshold for both the premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £50 million. Raising the MMC will give investors greater trust and clarity about the types of company with shares admitted to different markets.
- 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.
Alongside this, and as part of the same paper, the FCA has set out a discussion seeking views on the overall structure of its listing regime and whether wider-reaching reforms could improve the longer-term effectiveness of the regime. The discussion paper seeks to understand the value placed by market participants on different aspects of the FCA’s current regime as well as to gather views on how the regime might be modernised.
Clare Cole, Director of Market Oversight at the FCA, commented on the proposals:
‘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.’
The FCA is consulting for 10 weeks on these proposals with a closing date of 14 September 2021. Subject to consultation feedback and FCA Board approval, it will seek to make relevant rules before the end of 2021.