Reforms to the UK listing regime - FCA publishes discussion paper
The FCA has published Discussion Paper 22/2 ("DP") containing proposals for further reform of the UK listing regime in a bid to boost the growth and competitiveness of the UK market. In the DP, the FCA also summarises the feedback it received as part of its discussion of the purpose of the listing regime in Consultation Paper 21/21 ("CP").
The publication of the FCA's DP on 26 May 2022 follows the publication of Policy Statement 21/22 ("PS") and the CP, outlining the feedback received on proposed amendments to those existing listing rules which the FCA views as barriers to companies listing. The publication of the PS brought in new rules, including those on dual class shares structures in the premium listing segment. The FCA now wishes to build on that and continue the discussion by seeking views on how the listing regime could be reformed further.
A shake-up of the existing listing regime
The FCA, in part acknowledging concerns around the complexity of the UK listed regime as well as the costs associated with being listed, proposes a sweeping change to the two-tier structure currently in place for the Official List. Under the existing regime, companies file either under the premium or standard segment, a system which in the FCA's view creates unnecessary difficulties. A new regime would introduce a single segment for equity shares in commercial companies, where all issuers would list subject to a single set of eligibility criteria and in all cases, require a Sponsor. Issuers would then have to follow "robust" mandatory continuing obligations, with the ability to opt into a second set of supplementary continuing obligations - essentially being those under the current premium listing regime, ensuring an appropriate level of investor protection.
Bold but necessary?
The proposals represent a radical series of changes to the current regime. The FCA's move to rebrand the two-tier system builds on Lord Jonathan Hill's review of the listing regime and the analysis outlined in the CP, which showed a reduction in the number of companies being admitted to both the LSE Main Market and AIM over the last two decades. The FCA also points to research by New Financial, according to which only 5% of global IPOs occurred in the UK in 2018.
Traditionally, companies that could not satisfy the premium listing eligibility requirements at IPO opted for the standard listing route, often holding an ambition to "step-up" to the premium segment at a later date. Simplifying the rules and reducing the cost and complexity of listing is welcome, but it remains only a piece in the puzzle of working out how best London might remain an attractive international destination for entrepreneurs.
It remains to be seen how any transitional arrangements might operate should the FCA's proposals be implemented. The FCA has invited views on the proposals themselves, as well as on any transitional arrangements that might be appropriate if they are adopted, by no later than 28 July 2022. We can expect that the FCA will either issue a further discussion paper or bring forward specific proposals after that time.