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FCA reform continues: A single route to listing


On 26 May, the FCA published a discussion paper setting out its response to feedback received regarding the structure of the UK listing regime. The feedback was in response to the FCA's Primary Markets Effectiveness Review.

The FCA puts forward a regime which inverts the status quo: a single segment regime for Main Market equity shares within which there is a base layer of mandatory obligations and the flexibility to adopt additional obligations.

In doing so, the FCA is seeking to keep the UK markets competitive, and to remove some of the barriers to a UK listing.

What is being proposed?

Companies would list under a single set of eligibility criteria, with a sponsor still being required, and would follow a minimum set of mandatory continuing obligations. Under the single segment regime, companies would simply be described as having a "UK Listing". At the point of listing, companies would also decide whether to opt into a second set of "supplementary" (non-mandatory) continuing obligations, which would be similar in scope to the existing rules for premium listed companies. The FCA states that this decision to opt in or out would be based on the specific characteristics of a company's business or the perceived needs of shareholders.

Once listed, moving in and out of the supplementary regime would be analogous to moving between the current premium and standard segments of the Official List. Shareholder approval would be required "where appropriate".

The proposals in more detail

As part of the proposal for a single listing segment, the FCA is looking at various changes, including the following:

  • Eligibility criteria – the FCA is proposing a single set of eligibility criteria, to eliminate the "quality" differential between issuers. It is considering removing the current financial eligibility criteria for companies seeking admission to listing, which include a three-year representative revenue earning track record, three years' of audited historical financial information and a "clean" or unqualified working capital statement. Instead, it would move to a disclosure-based regime which would allow investors to decide whether or not to invest based on the disclosures in the prospectus.

  • Listing Principles – the FCA is considering whether the Premium Listing Principles should be extended to apply to all single segment companies. This would mean there was one common set of principles to which all commercial companies with an equity listing must adhere.

  • Dual class share structure ("DCSS") – the FCA is consulting on whether DCSS companies which are currently eligible for premium listing should be permitted to list in the single segment. Under this proposal, standard listing would no longer exist as a more flexible option for companies with DCSS which are ineligible.

  • Division between mandatory and supplementary continuing obligations - the FCA is seeking views on the division between the two proposed sets of ongoing obligations:

    • the core mandatory continuing obligations consisting of requirements that focus on transparency and protecting shareholders where their interests may be different to those of management or a significant shareholder; and

    • the supplementary continuing obligations consisting of those obligations which provide shareholders with an enhanced role in holding the company to account on an ongoing basis, including the controlling shareholder regime and the rules on independence and "significant" transactions. The FCA's preferred approach is an "all or none" approach, so that issuers either opt into all of the supplementary obligations or do not opt in at all.

The Discussion Paper includes a table illustrating the suggested division of the obligations which is set out below.

  • Threshold for Class 1 transactions – the FCA is considering whether the current class test thresholds remain appropriate.

  • Transitional arrangements – The FCA anticipates that standard listed companies would be allowed to retain their standard listing or could undergo an eligibility assessment for inclusion in the single segment. For premium listed companies, the FCA would encourage dialogue between companies and their shareholders regarding compliance with the supplementary continuing obligations, and potentially require a shareholder vote.


What about overseas issuers and SPACs?

The FCA intends to retain the regime currently applying to standard listed companies for companies listed overseas. In the Discussion Paper the FCA states that the new single segment would be available to overseas companies, but that in practice it may be difficult for overseas listed companies to meet all of the requirements. It also acknowledges that special purpose acquisition companies (SPACs) are unlikely to meet the criteria for the new single segment, but that it would consider allowing them to list under the current requirements of the standard listing.

Chapter 15

The FCA has not identified any specific or fundamental concerns with the Chapter 15 regime which applies to closed-ended funds, and it therefore intends to maintain the substance of the existing regime. However, it is interested in views as to whether there may be benefits in considering some elements of the reforms. For example, it is considering whether the proposals for the removal of requirements relating to "clean" working capital statements and their replacement with a prospectus disclosure regime (see above) would also be beneficial. The FCA is also interested in any other views of desirable changes to Chapter 15.

Sponsor regime

The FCA proposes to apply the regime throughout the single segment. It is exploring whether changes should be made to eliminate perceived inefficiencies in the regime, in particular with regard to rules on sponsors' record-keeping, conflicts of interest and fee structures.

Index eligibility and investor protection bodies

It is likely that the deciding factors in whether issuers opt into supplementary obligations would be index eligibility and the requirements of investor bodies.

As, currently, only premium listed shares are eligible for inclusion in the FTSE UK Index Series, it remains to be seen how FTSE Russell would amend its requirements in light of the proposed new regime.

Will this really be a single regime?

Although there would be one "single" segment for listed companies, there would continue to be companies listed according to the old standard listing regime, including SPACs, secondary listed overseas companies and other companies currently listed on the standard segment who were ineligible for the single regime.

Next steps

The FCA requests comments by 28 July. It will then provide further feedback and consider whether to issue a consultation paper or further discussion paper in due course. It notes that it is still considering its response to feedback with regards to removing duplication between admission to the Official List and admission to a trading venue, which will be dealt with separately.

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