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FCA confirms listing rule changes to boost stock market

Lower free float and greater controls for founders now allowed for newly-listed companies
December 3, 2021

The financial watchdog has implemented a handful of changes proposed in the UK Listing review and the Kalifa Review of Fintech, in a bid to encourage innovative founder-led companies to list in London and improve the quality of companies in leading UK indices.  

Among the most significant of the changes, which came into force on 3 December, is allowing a “targeted form” of dual class share structures within the premium listing segment. Firms with a premium listing benefit from increased liquidity and are eligible for inclusion in the FTSE indices. 

Another key change is reducing the amount of shares an issuer is required to have in public hands from 25 per cent to 10 per cent. These changes bring the listing rules in London closer to the US, which the UK has been losing listings to in recent years.  

The Financial Conduct Authority (FCA) also increased the minimum market capitalisation threshold for both the premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £30m. 

“Raising the  minimum market capitalisation will give investors greater trust and clarity about the types of company with shares admitted to different markets,” the FCA said in a statement. 

The rule changes have been broadly welcomed by industry commentators, while some worry it will dampen London’s governance standards. “"Rule tweaks will encourage more companies to list in the UK providing welcome opportunities for investors,” said Anne Fairweather, head of government affairs and public policy at Hargreaves Lansdown.

Fairweather was hopeful for further changes as well. Retail investors “must” have the opportunity to invest at the IPO stage and “greater protection” with secondary fund raises, she said, adding that “the government must now look to address wrinkles in the way reams of information must be disclosed through the use of old-fashioned prospectuses, which currently limit the attraction of offering new capital raisings to ordinary investors". 

In September, the Institute of Directors, which supports and represents UK business leaders, said the FCA should be wary about changing rules around related parties and controlling shareholders, noting that these regulations “are crucial bulwarks of good governance on the London market”.

The FCA said it expects to implement more changes next year, as it received “strong engagement” from a request for reviews on whether wider reforms could improve the stock market’s long-term effectiveness. 

The watchdog added it “intends to provide further feedback on these responses in the first half of 2022, including proposed next steps.”