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Britain’s financial regulator’s plans to encourage more companies to list their shares in London have sparked a hostile reception from Britain’s pension schemes, which warned on Wednesday that the proposals would damage the city’s attractiveness as a as a global business center.
In an open letter to the Financial Conduct Authority, 10 of the biggest pension schemes warned the watchdog that its proposed reforms to the UK listing regime would undermine “fundamental investor protections”.
Signatories including Railpen, Nest and the Universities Superannuation Scheme argued that the planned overhaul would have the opposite effect to that envisioned by the watchdog. The FCA is seeking to encourage more businesses to come to London, where registrations have fallen by 40% since 2008 in the face of increasing competition trade in the United States, continental Europe and Asia.
The letter highlighted the threat to shareholders’ voting rights on major transactions, such as the takeover of a UNITED KINGDOM– company listed by a related party.
The 10 pension schemes, which oversee a total of £300billion in retirement savings, have argued for the scheme dilution of shareholder rights would make it more difficult for institutional investors to act as effective custodians of their assets.
FCAs proposals would remove the requirement for companies to have three years of audited accounts and merge the standard and premium London markets into one category, making listing more attractive to start-ups. The changes would also give company founders greater voting rights than ordinary shareholders through the use of dual-class share structures.
“We do not believe the proposed changes will address the fundamental issues affecting our equity markets. Rather, we believe they will amplify current challenges and lead to worse outcomes for our members,” said Michael Marshall, head of investment risk and sustainable ownership at Railpen, the pension scheme for UK railway workers.
The FCA’s plans would also ‘diminish’ the UK’s reputation for robust investor protection and high standards of corporate governance, the letter says.
The Pensions and Lifetime Savings Association, a trade body for workplace pensions, also expressed concerns about the reforms in a separate response to the watchdog’s consultation, which ended on Wednesday.
He argued that the proposed changes to the rules “could not” result in more listings while lowering the standards expected of existing listed companies and diluting the overall quality of the London stock market.
“The new rules risk having the opposite effect of what is hoped, potentially reducing the pool of institutional and retail investors willing to invest in UK-listed companies,” said Maria Espadinha, senior policy adviser. at the PLA.
The FCA has privately acknowledged that the rule changes would require investors to do more due diligence and place greater demands on shareholders to engage with companies on key transactions. The regulator says the changes will bring the UK in line with many other jurisdictions and help create more jobs and economic growth.
“Any reform of the London stock market will naturally elicit a range of views, which is why we are having an open discussion about the proposals and the change in risk appetite they would entail. We look forward to further discussions with investors,” the FCA said. The watchdog plans to publish the revised listing rules in the fall.
