Greg Stonefield writes for Finextra on the implications of a recent FRC proposal for London’s capital markets
min readEvery financial centre eventually confronts the same uncomfortable question: What, precisely, is it willing to trade in order to compete?
The Financial Reporting Council’s (FRC) recent consultation and resulting proposal will force London to confront that question. The proposal sets out how, for a limited two-year period, Chinese companies listing Global Depositary Receipts (GDRs) in London through the Shanghai and Shenzhen Stock Connect programmes would be permitted to use Chinese Standards on Auditing (CSA) rather than International Standards on Auditing (ISA). Auditors would remain subject to FRC registration and supervision, and disclosure would be required. Furthermore, the exemption would apply only to a niche segment of the International Order Book.
There is a case for change - Switzerland and Germany both already accept CSA for comparable Stock Connect listings. Nonetheless, there are broader considerations beyond the headline numbers. For instance, the concentration of Chinese GDRs in Zurich and Frankfurt likely reflects state policy, regulatory negotiation, and bilateral economic frameworks just as much as audit equivalence.
Greg Stonefield, Partner in our Corporate team, considers the FRC's recent proposal and its implications for London's Capital Markets in Finextra, arguing that, taken together, these changes reflect a "concerted attempt to recalibrate London’s offer":
On paper, it is a modest adjustment. In principle, it touches the core of London’s regulatory identity. London’s enduring claim has never been that it is the cheapest or most permissive market. Its claim has been that a London listing carries institutional weight, that investors can rely on disclosure discipline, audit rigour, and supervisory credibility. The consultation therefore raises a question larger than its mechanics: how elastic can standards become before the signal they send begins to blur?
Read the full article in Finextra here.
