FSA consults on changes to listing rules
Regulator consults on proposals on corporate governance to ensure companies are managed independently from their shareholders.
The Financial Services Authority has proposed a number of changes to the listing rules that aim to enhance the effectiveness of the listing regime.
The listing rules set out the requirements for companies listed in the UK and are the responsibility of the United Kingdom Listing Authority (UKLA), operating under the FSA.
In the consultation paper, published today (2 October), the regulator said the proposals fall under corporate governance and free float provisions.
The FSA proposes to further strengthen the listing regime by adopting greater corporate governance requirements for companies with a dominant shareholder. The FSA will increase the tools available to independent shareholders to influence the governance of the companies in which they have invested.
These proposals include introducing the concept of a ‘controlling shareholder’; requiring an agreement is put in place to regulate the relationship between such a shareholder and the listed company; and ensuring that this agreement is complied with on an ongoing basis. This will ensure the company is managed independently from that shareholder.
The FSA will also require a majority of independent directors on the board where a controlling shareholder exists and introduce a new dual voting procedure to allow independent shareholders to have more say in their appointment.
The regulator has also proposed changing the circumstances for free float requirements. The free float requirements are set at an EU level and allow the FSA to consider a free float of below 25 per cent if there is sufficient liquidity.
The FSA proposes detailing the circumstances where it might consider modifying the 25 per cent free-float requirement for premium listings, indicating that any modification beneath 20 per cent would be unlikely; and removing the requirement for a minimum absolute percentage free float within the standard segment, provided that sufficient liquidity is present.
David Lawton, the FSA’s director of markets, said: “We believe that these proposals will strengthen the investor protections afforded by the Listing Regime, particularly for companies with controlling shareholders. Of course, it is primarily the responsibility of shareholders to use these new provisions effectively”
The proposed changes follow a consultation in January 2012 on the premium listing regime, amid market debate on the issues of free float, minority shareholder protection, corporate governance and the initial public offering market in general.