New UK listing rules - how did we get here and what's next for the UK public markets?
On 7 March 2024, the Financial Conduct Authority (FCA) published the second tranche of the proposed new UK Listing Rules. The UK Listing Rules reform process began back in November 2020, when the then Chancellor, Rishi Sunak, announced HM Treasury’s intention to establish a taskforce to make recommendations on the future of the UK listing regime. This was followed in March 2021 with the UK Listing Review, which highlighted the overly burdensome nature of existing listing rules and suggested an extensive array of improvements.
In May 2023, the FCA released a consultation paper (CP23/10), outlining proposed changes, and in December 2023, a first draft UK Listing Rules. Various key sections were outstanding, so on 7 March 2024, an additional trache of UK Listing Rules was published, providing a full picture of the new listing framework. A detailed look at the UK Listing Ruled reform timeline is set out below:
Throughout the reform process, the FCA has consulted extensively with market participants and the resulting draft UK Listing Rules are indicative of the FCA's commitment to creating a more flexible and responsive framework, tailored to the evolving dynamics of the global financial ecosystem.
Key changes proposed by the UK Listing Rules
Key changes being proposed in CP23/10 include:
- The replacement of the two-tier structure (premium and standard listing categories) with a single equity shares (commercial companies) (ESCC) listing category.
- Introduction of a single set of Listing Principles, replacing the previous two sets.
A shift in the focus of rules applying to companies in the ESCC category, which includes:
- Simplification of eligibility obligations, such as no longer requiring three years of historical financial data or a clean 12-month working capital statement.
- Removal of the cap on the total number of warrants or options.
- Relaxation of rules for Class 1 transactions, focusing on enhanced market notification and disclosure and removal of rules relating to Class 2 transactions. Class 1 transactions will no longer require shareholder approval.
- Changes to the related party transactions rules, whereby a related party transaction does not need the approval of the issuer’s independent shareholders. The threshold at which a substantial shareholder becomes a related party will also increase from 10% to 20%.
- Creation of four additional listing categories to cater to diverse company needs.
- Retention of six existing listing categories, with some renaming and rule revisions, ensuring consistency and stability within the new framework.
- Removal of the Premium Listed sovereign commercial companies category.
- Changes to the sponsor regime and sponsor competence rules, to streamline the process, reducing the burden on companies whilst maintaining necessary regulatory oversight and support.
What’s coming up next for UK public markets?
The FCA’s reform of the listing arcitecture represents a strategic recalibration designed to invigorate the UK capital markets by enhancing transparency and fortifying investor protection.
In the coming months, market participants will face a critical period of transition and adaptation as they engage with the intricacies of the proposed new UK Listing Rules. The final version of the UK Listing Rules is expected to be published in the summer, with implementation around two weeks after publication.
The wider regulatory landscape is everchanging and there are also other reforms approaching. The UK Prospectus Regulation, which is a modified version of the EU Prospects Regulation and which has been in force in the UK since the end of the Brexit transition period, is expected to be revoked later this year, with the provisions of the Public Offers and Admissions to Trading Regulations 2024 (SI 2024/105) (POAT Regulations) coming into force at the same time. Publication of a prospectus will remain a key element of the process for admission of securities to trading on a UK-regulated market, with the FCA being empowered to determine when a prospectus is required. The FCA is yet to consult on specific rules but is expected to do so over the summer. Look out for more from us on these developments as there progress.
