FCA makes sweeping changes to UK listing rules - this is what it means

The financial watchdog has set out the biggest set of stock market reforms in over 30 years

FCA reception
(Image credit: The Financial Conduct Authority)

The Financial Conduct Authority has pressed ahead with sweeping changes to the UK’s listing rules, which the financial watchdog says is the biggest set of stock market reforms in over 30 years.

According to the FCA, the change will make it more "straightforward" for companies to list on the UK stock market and comes at a time when the London market has been hit by a number of UK-listed firms being bought out or moving abroad.

Earlier this month, for example, Video games developer Keywords Studios accepted a £2.1 billion takeover bid that will see it leave the stock market, while Paddy Power-owner Flutter shifted its main stock market listing to New York in May. German-owned Tui also signed off a plan to delist from London in February.

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Sarah Pritchard, an executive director at the FCA, says: "A thriving capital market is vital in delivering investment to growing companies plus returns and choice to investors. That’s why we are acting to make it more straightforward for those seeking to list in the UK."

Why has the FCA changed the listing rules?

By streamlining the listing process and introducing more flexibility, the FCA hopes to create fresh avenues for corporate financing and improve the competitiveness of the UK’s stock markets, thereby increasing investment opportunities.

Naureen Zahid, director of investor relations at venture capital firm OpenOcean, says: “This is a much-needed shot of adrenaline for the London Stock Exchange. The FCA’s new listing rules could unblock the UK’s tech ecosystem by making public markets more accessible to early-stage companies. 

"For startups, the streamlined eligibility requirements and reduced procedural hurdles mean faster and less costly access to capital, allowing them to scale more rapidly.”

Under the new rules, set to take effect from the 29th July, the requirement for firms to get approval from shareholders for certain mergers will also be scrapped. 

The need to consult shareholders for certain transactions has been off putting for some firms wanting to list in the UK, and was reported to have been one of the reasons the London Stock Exchange lost out to the US last year when UK chip maker Arm Holdings chose Wall Street over London for its stock market return.

Chancellor Rachel Reeves said: "The financial services sector is central to the UK economy and at the heart of this government’s growth mission.

“These new rules represent a significant first step towards reinvigorating our capital markets, bringing the UK in line with international counterparts and ensuring we attract the most innovative companies to list here.”

Stock market changes: concerns for investors 

The removal of the need for shareholder votes on significant or related party transactions, however, has troubled some investors. 

Although shareholder approval remains necessary for major events like reverse takeovers and delistings, the chief executive officer of investor group ICGN, Jen Sisson, says: “Investors have repeatedly expressed their concerns over the listing rules reform, and have not been heard.

“The changes mean that shareholders, the owners of the company, will no longer have a right to vote on significant and related party transactions. Those votes are an important protection for minority investors, ensuring that large shareholders and company directors do not unfairly benefit from their position.”

The regulator says: “The FCA has been clear that the new rules involve allowing greater risk, but believes the changes set out will better reflect the risk appetite the economy needs to achieve growth.” 

Chris Newlands

Chris is a freelance journalist, and was previously an editor and correspondent at the Financial Times as well as the business and money editor at The i Newspaper. He is also the author of the Virgin Money Maker, the personal finance guide published by Virgin Books, and has written for the BBC, The Wall Street Journal, The Independent, South China Morning Post, TimeOut, Barron's and The Guardian. He is a graduate in Economics.