The Listing Rules previously set out the mandatory standards for any company wishing to list its shares or securities on the main market of the London Stock Exchange. As of 29 July 2024, they have been revoked and replaced in their entirety by the UK Listing Rules (UKLR), which create a new framework for listing. The reforms, which represent the most significant change to the listing rules in 40 years, are are part of a wider review of the UK's capital markets regulation and follow two public consultations on the topic. The intention of the reforms is to better align the UK's listing regime with international competitors and remove some of the red tape in favour of a more disclosure-focused approach.
The principal change made by the UKLR is removing the 'premium' and 'standard' listing segments in favour of a single 'commercial companies' category for equity shares and creating other new listing categories, which won't be relevant to housing association bond issuers.
'Debt and debt-like securities' (i.e. bonds) remain as a discrete category, with only consequential or minor changes made to the rules.
However, bond issuers that have (or are considering having) bonds listed on the main market of the London Stock Exchange will be impacted by other changes that are applicable to all issuers. The key changes to be aware of are:
1. Revised Listing Principles (UKLR 2):
The six UKLR Listing Principles have been reconfigured to apply to every issuer with listed securities. Listing Principles 1 and 2 already applied to all issuers but Listing Principles 3-6 previously only applied to issuers of 'premium' listings and this therefore represents an expansion of obligations for bond issuers:
- Listing Principle 1. An issuer must take reasonable steps to establish and maintain adequate procedures, systems and controls at all times to enable it to comply with its obligations. This includes directors ensuring that adequate governance arrangements are in place. In turn, this principle seeks to protect investors, ensure compliance with the UKLR and encourage the appropriate storage and access of such information.
- Listing Principle 2. An issuer must deal with the Financial Conduct Authority (the FCA) in an open and co-operative manner, and take reasonable steps to ensure that its directors deal with the FCA in such a manner (including in their responses to FCA's requests for information and attending interviews with the FCA).
- Listing Principle 3. An issuer must take reasonable steps to enable its directors to understand their responsibilities and obligations as directors.
- Listing Principle 4. An issuer must act with integrity towards the holders and potential holders of its listed securities.
- Listing Principle 5. An issuer must ensure that it treats all holders of the same class of its listed securities that are in the same position equally in respect of the rights attaching to those listed securities.
- Listing Principle 6. An issuer must communicate information to holders and potential holders of its listed securities in a way that avoids the creation or continuation of a false market in those listed securities.
During the consultation process, concerns were raised about Listing Principle 3 and the additional focus on directors and the perceived increase in liability. However, the FCA confirmed in their consultation response that the additional guidance is not intended to alter the roles or responsibilities of directors or boards or indicate a shift in the FCA supervisory approach. However, Issuers may want to consider arranging appropriate training for their boards to ensure that directors/boards of management are aware of their obligations.
2. New provisions around transparency and disclosure, and to strengthen FCA's ability to access records and enable them to serve notices to issuers (UKLR 1)
The new provisions include the requirement for all applicants (and issuers) to:
- provide the FCA with up-to-date contact details of at least two of its executive directors (information to include name, business telephone and business email), and notify the FCA of any changes to this information as soon as possible; and
- provide, and update, information for the service of documents (information to include a nominated person's email or alternatively UK postal address).
Existing issuers will have 6 months to comply with these new provisions.
It is useful to note that the FCA consultation response clarified that they are not seeking to prescribe or infer specific roles or responsibilities on the individuals nominated as key contact persons, but to assist the FCA in the event of an urgent matter.
3. Minor modifications to the overarching listing rule processes and procedures (UKLR 20)
There are certain modifications to the application process under UKLR 20.
These include a requirement, as part of the application process, for the board to confirm that reasonable steps have been taken to establish adequate procedures, systems and controls to enable the applicant to comply with its obligations under the UKLR, the disclosure requirements, the transparency rules and the corporate governance rules following admission. Applicants will need to submit a new Procedures, Systems and Controls Confirmation Form with their application. The form is available on the FCA's website and there will be a transition period of 6 months for existing issuers.
The next stage of reforms will deal with prospectus reform. The new rules on the Public Offers and Admissions to Trading Regime were published by the FCA for consultation on Friday 26th July. Consultation ends on 18 October.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
