The UK Financial Conduct Authority (FCA) wants to attract growth companies by potentially eliminating the choice of two segments (Premium or Standard). Officials employed by this Agency have published feedback on the ongoing review of the efficiency of primary markets. This information will have a significant impact on both listed companies and those wishing to go public.
According to the FCA, the reason for the proposed changes is to ensure that the UK stock market continues to be one of the leading financial centres. Another goal of UK officials is to make the UK financial sector open to growth companies and internationally competitive. With changes in laws and tax systems around the world, this seems like a natural step towards ensuring that companies facing regulatory pressure from alternative jurisdictions relocate their operations to the UK.
The FCA has asked all companies falling within the scope of the announced regulatory demands for feedback by July 28, 2022, after which it intends to develop a consultation document or a follow-up document for discussion.
The current regime
Currently, British companies are required to decide whether they meet the criteria of the Premium Segment or the Standard Segment.
The regulations governing the Premium Segment require, for example, a minimum documented income and even if this regulation offers companies some prestige, it can be an obstacle for smaller, growing companies.
The Standard Segment is currently used mainly by issuers of debt securities and was created to impose certain minimum regulatory requirements related to EU legislation. After Brexit, this issue no longer has legal relevance.
Some of the changes have already been implemented into the UK legal system. These include reducing the burden of secondary fundraising and pre-emptive offers. It is important that FCA plans to further improve the system in the near future.
The proposed new regime
Some of the changes the FCA is proposing include:
- Companies would only need to meet one set of criteria and thus be able to choose a further set of commitments.
- Removal of a significant number of financial requirements
- Imposition of the obligation to disclose the prospectus
- All companies can list with a qualified working capital statement
- Minimum essential obligations to be followed
- Minimum market capitalization up to £30 million
- Minimum free float 10%
The FCA has expressed confidence that this single UK segment of commercial stock listings will attract more stable and better quality companies than the current standard model.
The current FCA proposal does not provide any specific details yet, but it has been stressed that the guiding goal is to narrow the division between the Standard and Premium segments. FCA is trying to achieve its goals by increasing the basic transparency requirements in the standard segment, rather than lowering a number of requirements in the premium segment. This seems to be a further push to encourage early-stage firms to seek listings under continuous supervision. This is required in both AIM and AQUIS.
However, all indications are that the FCA is likely to maintain the current model for listed companies registered abroad for secondary listings. This action is intended to facilitate listing on two exchanges and perhaps make the new system less relevant for these companies.
All of the changes discussed above are still at an early stage and it will be some time before we see what the final legal framework might look like. It is highly likely that, as with other recent changes, the FCA will introduce transitional provisions that will ensure management control of any adopted changes.
