The Financial Conduct Authority's proposal to have a single category for equity shares in companies will put greater responsibility on investors.
In an episode of the Inside FCA podcast, Clare Cole, director of market oversight, explained the background to the FCA's consultation, which proposes significant reforms to improve the framework for listing commercial companies’ equity shares.
She said the proposals look to change the current two-tier listing regime, which has a premium and a standard listing, into a single listing.
“We’ve moved to a much more proportionate set of eligibility requirements,” she said. “We've removed shareholder approval in certain circumstances, and we've moved to a much more permissive disclosure based regime.
“Whereas, historically, we've been quite focused on decisions around eligibility and the requirement for shareholder approval.”
Cole said the FCA has also made some important changes to dual class share structures.
In terms of likely impact, she said the FCA hopes it will see more issuers coming to the UK markets.
She explained the reduction in complexity means issuers will hopefully find the FCA more competitive with other jurisdictions and one of the key changes is moving to a regime which is more transparency and disclosure based.
“But it also means that we’re moving to a position where investors will need to be more involved in decisions around the companies that they invest in and, hopefully, the disclosure that we provide will support them in doing that,” she said.
Ozge Ibrahim, who was hosting the podcast, asked Cole if replacing the single listing category for commercial companies represents a weakening of regulation.
But Cole said it represents a different type of regulation - one where the FCA moves from a permissive based to a risk based.
This comes as last May, the FCA consulted on what a new regime could look like and proposed changes to the listing rulebook.
It proposed to streamline the UK's listing rules to attract a wider range of companies, encourage competition and improve choice for investors.
The regulator said at the time that it wanted to make the listing regime - the rules companies must follow to be allowed to list their shares on the UK market - more effective, easier to understand and more competitive.
This included replacing its existing ‘standard’ and ‘premium’ listing segments with a single category for equity shares in commercial companies.
The FCA said a single equity category would remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies pursuing their business strategies.
Cole said the regulator has been very clear that it wanted the regime to be one where it puts information into the hands of the investors.
“So, one where there's greater transparency and disclosure,” she said. “But it was really clear that investors would need to have a role to play in the process.
