Britain’s financial watchdog has proposed a shake-up of London’s stock market listing rules in an attempt to shore up the UK capital’s reputation as a financial centre.
The move followed attacks on the quality of the UK market by US regulators and warnings from several big British institutional investors that London’s name risked being damaged by lower corporate governance standards.
The Financial Services Authority put forward two suggestions on Monday to clear up confusion over the plethora of rules for British listed companies, potentially creating a “premium brand” for the main list of the London Stock Exchange. They are aimed at helping investors understand which companies follow “gold-plated” regulations.
The FSA scrapped earlier proposals to rename eight listing categories but suggested dividing listings into two tiers. Alternatively it suggested applying the “Official List” title to what are currently primary listings.
On the latter proposal, global depositary receipts and secondary listings, the favoured route for overseas companies, would no longer count as “London-listed”.
David Lawton, head of markets policy at the FSA, said the aim was to enable investors to understand what rules the companies they bought into had to follow.
There is widespread confusion about what the different listing categories mean, with “secondary-listed” companies, for example, not needing any primary listing elsewhere.
Foreign companies which have primary listings do not have to give investors the right of first refusal on a new share issue or follow the combined code of corporate governance, and British companies are not eligible for secondary listings.
Institutional investors have been lobbying the FSA to make clear the distinction between full, primary listings on the one hand and global depositary receipts and secondary listings on the other, following a wave of listings of emerging market companies using the latter.
Several have expressed concern that the collapse of a large Kazakh or Russian company listed via GDRs could damage London’s reputation because few understand that GDRs and secondary listings require companies to follow only the European minimum standards – also applied on Euronext.