Britain remains one of the best places in the world to access
debt and equity markets and is placed in an enviable time zone to
coordinate international business.
The UK Department for Business, Innovation and Skills
(BIS) and the London Stock Exchange
(LSE) want London to maintain its attractions and
be one of the best places in the world to start, run and grow a
business. Accordingly, BIS and LSE are working together to
deliver ambitious proposal designed to attract entrepreneurs and
high-growth companies to the UK and to the London markets.
IPOs for high value and high growth
BIS and the LSE have announced that they will take bold action
to open up London's equity markets to new high growth
companies, particularly from elsewhere within the European
Union. The cornerstone for these proposals will be a new route
to IPO for companies seeking a Premium Listing on the Main
The objective is to attract mid-sized high growth and capital
intensive internet and technology companies, companies which need
to raise new equity funds as soon as possible in order to deliver
swift business growth.
Companies of this size are not the usual currency of AIM, the
LSE's market for smaller growing companies and the most
successful growth market in the world.
Encouragement of equity
In another positive step, the Government has committed to look
to the rules which may be deterring investment into growth
companies: the significant cost discrimination of equity when
compared with debt must be one of the most significant deterring
The free float
Over the last few years, we have had a confusing and
inconclusive public debate regarding the free float requirement for
new entrants to the London equity markets. There remain significant
issues in relation to the lack of free float in emerging markets
mining issuers such as Bumi and Eurasian Natural Resources Corp,
and there has been much commentary that for Premium Listings the
25% free float requirement should be increased. Indeed, David
Paterson, the head of corporate governance at the National
Association of Pension Funds (which represents about 15% of all
shareholders on the UK stock markets) has been advocating that the
25% free float requirement be raised to 50% or more.
The Financial Services Authority however has recently concluded
that the 25% free float requirement should rather be softened where
there is sufficient liquidity, presumably to ensure that the UK
remains competitive with other exchanges in attracting
international issuers. However, formal relationship
agreements will need to be put in place between a "controlling
shareholder" and the listed company so as to deliver
additional corporate governance safeguards for investors.
The US markets currently have no free float requirements and
there seems to be a growing trend for UK issuers to consider
listings in the US: the most notable UK issuer going to the US
markets this year has been Manchester United.
Is this really a response to the JOBS
BIS has heralded its proposal to be the UK's response to
President Obama's JOBS Act. If it is, the UK's
response is inadequate and too small-minded. Clearly the US and the
UK represent different markets, but in a quest to attract
international businesses, the JOBS Act (JOBS stands for Jumpstart
Our Business Startups) has significantly simplified the securities
regulatory regime for businesses up to a fairly significant
size. Clearly the UK is concerned that we do not lose
businesses to the US markets and that we keep European companies
within Europe. However, by focussing on how a company can come to
market rather than from whom the company can raise funding without
the need for a prospectus the UK proposals do not go nearly as far
as they should.
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This weekly update from Clyde & Co's Financial Services Regulatory Team summarises new developments as reported by the FCA, the PRA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week.
This weekly update from Clyde & Co’s Financial Services Regulatory Team summarises new developments as reported by the FCA, the PRA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week, with links to the full documents where these are available.
1 September 2013 will see the implementation of new guidance issued by the Institute of Chartered Accountants in England and Wales in relation to the financial reporting procedures that directors of companies seeking a premium listing must establish.
A summary of the new developments as reported by the FCA, the PRA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week, with links to the full documents where these are available.
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