FCA Listing Authority Advisory Panel (LAAP) and Markets Practitioner Panel (MPP) formal response to CP23/10: Primary Markets Effectiveness Review [pdf]

The Listing Authority Advisory Panel (LAAP) and the Markets Practitioner Panel (MPP) of the Financial Conduct Authority (FCA) have published a joint response to the FCA’s consultation on the implementation of a new listing regime.
To recall, in May 2023, the FCA launched a consultation on a proposed overhaul of the UK listing regime in an effort to remove current barriers to listing in UK and to make the regime simple, straight forward, with a minimum of regulatory requirements to ensure financial market stability. The key proposals included the removal of the dual listing regime for UK equity shares, the application of the sponsoring regime for all UK equity share issuers, the creation of a single set of listing principles, and the addition of two new listing categories for shell companies and preferred stock issuances. For more information, please see EventID 21064.
The two panels highly welcome and support the FCA’s proposals for the new listing regime as it will enhance the attractiveness of UK listing and balance „the needs of investors and issuers“ alike. However, the panels also note that there are some areas in the proposed new regime such as corporate governance, sponsor roles, and retail investor inclusion that deserve reconsideration and perhaps targeted changes. Some panel members also raise concerns regarding the proposals on dual class shares and related party transactions and would welcome further debate with the FCA in this context.
#### The key concerns of the panels are briefly noted below:
(1) Corporate governance and stewardship: The corporate governance and stewardship regime in the UK generally needs holistic reforms to remain effective in the future. It seems that the current regime is not fit for purpose, particularly when compared to regimes elsewhere, as the UK’s regime is too rigid and limits the discretion of company boards. This is due in particular to the „comply or explain“ requirements which have turned into „comply or accept the consequences“ requirements. It is essential, that in the context of the new listing regime, the corporate governance and stewardship regime is overhauled as well to ensure that the above noted goals are reached.
(2) Grandfathering and overseas issuers: The reforms should consider providing grandfathering provisions for existing overseas issuers that might have difficulty complying with the new corporate governance rules. Furthermore, the FCA shall consider granting new issuers the option to follow the corporate governance code of their home jurisdiction.
(3) Role of Sponsors: Although the panels acknowledge the role of sponsors and their benefits to issuers and investors alike, there are concerns that due to the various duties of sponsors, their costs may be too high in relation to their revenues, potentially leading to a reduction in the number of sponsors over time. Therefore, the panels recommend to reconsider the sponsoring regime and associated requirements.
(4) Retail Investors: The consultation lacks mention of retail investors, so the panels, despite the FCA’s emphasis on giving them greater access to secondary offers. Therefore, the LAAP and MPP suggest to amend the Listing Rules to include existing retail shareholders in follow-on offers and introduce a mandatory retail tranche of 5-10% for IPOs to ensure equal treatment with institutional investors.
(5) Dual Class Shares and Related Party Transactions: Some panel members express concerns about these proposals, particularly regarding adequate safeguards for shareholders (which are not further detailed).
—
As these are only the key issues addressed by the panels, please refer to the original document for more detailed, comprehensive information.