Policy paper

Terms of Reference: Lord Hill’s review on listings

Updated 21 April 2021

This was published under the 2019 to 2022 Johnson Conservative government

Context

On January 1 2021 the UK will regain full responsibility for its financial services rulebook, permitting it to tailor requirements more precisely to the needs of British companies, investors and markets. The government is determined to act early on this opportunity by commissioning an independent review that will gather evidence and make recommendations to the Government and UK regulators on how to encourage more high-quality UK equity listings and public offers.

UK equity markets are among the deepest and most liquid in the world. There are currently over 1,100 companies listed on the London Stock Exchange’s Main Market with a capitalisation of around £3 trillion.

These markets have demonstrated their capacity to make a significant contribution to the resilience of the economy since the COVID-19 pandemic, raising over £30bn between March and October. They will play an equally important role in the recovery phase.

Beyond their direct financing role, the Government believes that a dynamic market for equity issuance and initial public offerings is an important contributor to the financial service “ecosystem”, supporting jobs and growth in the financial and professional services sectors.

Finally it is critical to ensure the UK listings environment is well adapted to the needs of fast-growing new economy companies, including tech companies.

Objectives

The review will seek input and evidence from market participants, based on which it will propose a range of recommendations for how to boost the UK as a destination for IPOs and optimise the capital raising process for companies seeking to list on the main UK markets.

In evaluating options, it will consider both legislative and non-legislative measures, including measures which may fall to the Financial Conduct Authority (FCA) to consider.

In developing recommendations, the review should pay the highest regard to London’s reputation as a world-class market for company listings that promotes high standards of corporate governance, shareholder rights and transparency.

Scope

The independent review is asked to consider, in particular:

• whether current rules around free floats, dual class share structures, and track record requirements strike the correct balance between corporate governance and market integrity on the one hand, and the requirements of companies seeking to list on the other
• whether the requirements for when a prospectus has to be produced (which are currently harmonised at EU-level), are appropriate for the UK market – including whether companies that are already listed should be able to more easily raise new capital, and whether other triggers and documentation required for offers to the public and admission to trading venues are optimal for the UK market
• whether there are specific non-regulatory, non-legislative actions which the government could take to boost the UK as a destination for IPOs and optimise the capital raising process for large and small companies on UK markets
• other issues, including whether there is a case to introduce differentiated entry requirements for the UK’s premium listing segment in respect of companies which already have a primary equity listing on markets in other countries that are assessed to have high standards of corporate governance.

This is not an exhaustive list and the review may consider additional options, including any recommendations from Ron Kalifa’s Fintech Strategic Review. Any recommendations relating to FCA rules would be subject to further public consultation by the FCA.

Governance, engagement and timetable

The review will be chaired by Lord Hill who will provide a report and recommendations to the Government and FCA in early 2021. It will be for him to decide the nature of any process or group he might require to support him.

Its work will be carried out in consultation with a cross section of relevant stakeholders including the Government and FCA, and buy-side, sell-side and issuer interests, seeking input from legal and academic experts as necessary.