FCA Listing Reforms: Is A Single Segment Listing Regime The Way Forward?

• Published date: 24 June 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Contracts and Commercial Law, Shareholders
• Law Firm: Gowling WLG
• Author: Mr Charles Bond, Samantha Myers and Hugh Maule

A new discussion paper has been published by the Financial Conduct Authority (FCA) as part of the ongoing reform of the UK listing regime. This new paper follows the earlier consultation on Primary Market Effectiveness and the Hill UK Listing review.

The Hill UK Listing Review had recommended that the standard list be rebranded and re-marketed and the consultation feedback agreed with this. However the FCA noted that there was no practical way of making changes to the existing regulatory regime that would address the particular concerns raised about the standard segment, which included the lack of index inclusion and poor perception of issuers listed on the standard segment.

As a result, one of the proposed reforms is the creation of a single segment for equity shares in commercial companies which would replace the current standard and premium listing regimes.

The features of the single segment include:

• a single set of eligibility criteria;
• a robust minimum set of continuing "mandatory" obligations with a further set of "supplementary" obligations which issuers may opt into, following discussion and input from their shareholders. These would be based on the existing continuing obligations, with the mandatory obligations set at a level so as to ensure an appropriate level of investor protection for all listed companies. Issuers would choose the level of obligations at the point of listing, based on the specifics of their business, and, once listed, would only be able to move in or out of the supplementary regime with shareholder approval
  • the mandatory obligations would include related party transaction requirements, rules regarding open offers and rights issues, shareholder approval for cancellation of listing and dealings in own shares; and
  • the supplementary obligations would cover the rules regarding significant transactions, the controlling shareholder regime and the independent business requirement. The FCA is also considering reviewing the threshold for class 1 transactions, raising the threshold from the current 25% to 33%;
• retention of a sponsor in the same way as the current premium listing regime. The level of involvement forms part of the consultation, and would depend on the continuing obligation standard being followed;
• a disclosure-based regime for financial eligibility requirements. The FCA is considering replacing the current eligibility criteria of the premium listing segment with a disclosure-based regime that would allow investors to...