In aftermath of Brexit, The Great Britain has announced to modernize the listing rules to attract more high growth and Special Purpose Acquisition Companies (SPACs) on London Stock Exchange (LSE).
Britain has announced to modernize the listing rules to attract more high growth and Special Purpose Acquisition Companies (SPACs) on London Stock Exchange (LSE).
The moves gains significance as LSE is facing tougher competition from New York Stock Exchange (NYSE), NASDAQ and Euronext, since the end of Brexit transition period on December 31, 2020.
In order to keep LSE competitive, the Chancellor to Exchequer – Rishi Sunak had earlier commissioned a review of listings rules, which was led by the Former European Commissioner – Jonathan Hill. Now since the review details have been shared with Sunak, he is keen on implementing them.
Speaking on the review findings, Sunak said, “The review has more than delivered and I’m keen we move quickly to consult on its recommendations, cementing the UK’s reputation at the front of global financial services.”
The Financial Conduct Authority, the financial regulator of the United Kingdom (U.K.), will consult publicly on the proposed changes, though some would require legislation to implement. The Government faces pressure to act after swathes of euro stock and swaps trading left LSE for NYSE, NASDAQ and Euronext.
However, Asset Managers and Company Directors have warned about eroding corporate governance standards by easing of listing rules.
Referring to findings, Hill said, “The composition of the FTSE index makes clear another challenge: the most significant companies listed in London are either financial or more representative of the ‘old economy’ than the companies of the future.”
He further added, “The recommendations in this report are not about opening a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage.”
He said that all the findings are about closing a gap which has already opened up. All the recommendations are consistent with existing practices in other well-regulated financial centres in the United States (U.S.), Asia and Europe.
The new findings seek to move London in line with New York and other financial centres by allowing founders to list their company while still retaining significant control.
In his findings, Hill has recommended allowing dual class share structures which gives Directors and Founders enhanced voting rights on certain decisions for 5 years. The retail investor groups find this contrary to the “one share, one vote” principle. The minimum “free float” or amount of a company’s shares or in public hands would be cut from 25% to 15%. Hill also proposed that the prospectus, used by companies to set out their initial or secondary offer of shares, should also be fundamentally reviewed to make listing a company faster and simpler.
Citing examples of Australia, Singapore, Hong Kong, Japan and the European Union (E.U.), Hill said that regulators in these places have an objective of maintaining competitiveness of their financial sector and this would be helpful for Britain’s Financial Conduct Authority as well. Besides, there should also be an annual “State of the City” report form the fi, from the Finance Minister to Parliament on the financial sector’s competitive position.
