03 March 2021

Investmetn week: Lord Hill review: FCA urged to approach listings shake-up with caution

Lord Hill's listings review proposals have been broadly welcomed by investors, with the shake-up set to improve the competitiveness of the UK market, but some have urged the Financial Conduct Authority (FCA) to approach the recommendations with caution, warning that 'FOMO' should not be the driving force behind the easing of rules. '

The recommendations, published today (3 March), include allowing for company founders to be able to maintain control over their companies even after listing them on an exchange in London.

It would allow for dual-class shares in the premium listing segment of the London Stock Exchange, thereby allowing founders to keep control over their companies by giving them the ability to sell shares with lesser voting rights.

Hill said the new rules would allow the UK to close "a gap" between other trading centres that has emerged post-Brexit, and attract more companies to list in London. 

Group CEO of Schroders Peter Harrison said in a statement that the firm "is in full support" of the review, adding that it is "crucial that we do all we can to make the UK the most attractive place for companies to list and to do business for the benefit of investors". 

"There is a balance to be struck between ensuring the highest standard of governance and supporting the growth of companies and the UK economy. Lord Hill's review achieves that balance," he said.

"Over the past 20 years not only have we witnessed a 50% decline in listed public companies in the developing world but we have seen technology and growth companies become underrepresented in the FTSE.

"This announcement should encourage more innovative and pioneering businesses to list in the UK."

Partner and head of equity capital markets at law firm Ashurst Nicholas Holmes agreed that the proposals "address some competitive disadvantages that had built up over time in the London Listing Regime".

Private investors

Meanwhile, CEO of Aquis Exchange and Aquis Stock Exchange Alasdair Haynes welcomed proposals that would allow private investors greater access to Initial Public Offerings (IPOs) in the UK.

"It is excellent to see recognition of the importance of retail participation in IPOs in today's review, and the understanding that much of what restricts this today is down to unwieldy prospectus requirements," he said.

"We are therefore keen to see the proposals for prospectus reform implemented with as much urgency as possible to benefit the end investor."

Investment director at AJ Bell Russ Mould also welcomed the capacity for private investors to have "much improved access to company flotations", adding this is "a cause that really does need to be championed".

However, he said calls upon the FCA "to loosen listing regulations" should be treated with caution.

Investment week

© Investment Week