FCA to consult on Hill and Kalifa reforms

Clare Cole, director of market oversight at the FCA.

The Financial Conduct Authority (FCA) has launched a wide-ranging consultation to improve the effectiveness and competitiveness of the UK’s financial markets.

The consultation is a response to reforms proposed by Lord Jonathan Hill in the UK Listing Review and the Kalifa Review of UK FinTech to the country’s primary market regime.

The aim is to lower barriers to listing for companies and to extend the choice of investment opportunities in UK public markets.

More specifically, the UK watchdog is looking at plans for dual class share structures in the premium listing segment and lowering the required free float from 25% to 10% cent in certain conditions.

Dual class share structures offer two separate sets of shares – one to the general public which typically have limited to no voting rights, and those retained by founders and executives that have greater weighting in voting processes.

The dual class share structures enables company-founders to exert more control over the direction, which the theory goes should encourage them to list on UK exchanges.

The FCA intends also to simplify its rulebook and recommends raising the minimum market capitalisation of ordinary commercial companies in the premium and standard listing segments from £700,000 to £50m to enhance investor as well as protection.

“Effective public markets are critical in enabling companies to finance their businesses, which in turn creates growth and jobs for the UK economy,” says Clare Cole, director of market oversight at the FCA.

She adds, “These proposals are essential if we intend for the UK to continue to be a modern and dynamic market. Today, we are acting assertively to meet the needs of an evolving marketplace.

They are intended to encourage high quality companies to list earlier, and so increase the possibility of a wider investor base being able to access growth in these companies.”

In a statement, Lord Hill said, “Our Review emphasised the importance of making London more competitive and of constructing a more agile regulatory system, so I welcome the FCA moving swiftly to consult on more of our recommendations.”

He noted, “Coming after the Treasury’s announcement last week about the reform of the Prospectus regime, it is good to see momentum building to improve London’s attractiveness as a place to list.”

The consultation will last for 10 weeks and will close on 14 September. The FCA  hopes to implement the changes before the end of the year.

©Markets Media Europe 2021

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