Echoing some of the same themes as a government task force in Ontario, a government review in the U.K. is recommending a series of reforms designed to enhance the attractiveness of its markets and rejuvenate the flow of public listings.
A review carried out for the HM Treasury is proposing a range of reforms designed to enhance the U.K.’s appeal as a destination for public companies and to improve the capital-raising process.
The review, which was chaired by Lord Hill, aims to address a concern about a recent decline in listings, noting that London accounted for only 5% of global IPOs between 2015 and 2020, and that the number of listings in the U.K. has dropped by about 40% from its peak in 2008.
Among other things, it recommends changes to the listing rules, including provisions to attract more special purpose acquisition vehicles (SPACs) and to allow dual-class share structures, a rethink of the prospectus regime, and measures to facilitate the use of technology to enhance the efficiency of capital raising and to empower retail investors.
The review points to the complexity of regulatory requirements as a key factor impairing the U.K.’s competitiveness.
“In recommending that we update our system, we argue in essence that we should take the best from what our competitors around the world are doing and combine that with London’s traditional strengths,” the review said.
“We should be able to move faster, more flexibly and in a more targeted way; this may have a particular relevance as we think about regulation of the growth sectors of the future where the U.K. should be able to move more quickly — for example in fintech, where we are already the leader in Europe, or in green finance, where we should be well-positioned to become a global leader,” it said.
The U.K. review also recommends a change in the mandate of the Financial Conduct Authority (FCA) to establish growth and competition as a regulatory objective. Ontario’s task force has proposed a similar change for the Ontario Securities Commission.
Yet, the U.K. review stressed that these proposed reforms shouldn’t come at the expense of investor protection.
“None of our recommendations go beyond what can already be found in competing financial centres in the U.S.A., Asia or, indeed, Europe,” the report said, stressing that its recommendations are “not about opening up a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage. It is about closing a gap which has opened up.”
The FCA said that it will “carefully consider” the report’s recommendations, and that it will publish a consultation paper by the summer, with the goal of implementing rule changes by late 2021.
It also said it supports the review’s proposal for a fundamental review of the legislative framework for the prospectus regime, “with a view to better aligning documentation requirements with the type of transaction being undertaken.”