Austin adds, “Markets are about risk. The FCA rightly has a duty to protect consumers, but sometimes I think the balance tips too much in favor of protecting people from losing money. Nobody wants to see a regulatory race to the bottom, but sensible reforms are needed.
Last year, a review of the registration scheme commissioned by then-Chancellor Rishi Sunak and carried out by Lord Hill of Oareford recommended a range of measures aimed at attracting high-growth businesses to the UK. This led the Financial Conduct Authority to allow two-class share structures and reduced free-float requirements in a bid to stimulate the market.
Lord Hill and his team have not gone as far as they would like in terms of recommending far-reaching reforms, understands The Telegraph.
A group of institutional investors oppose a broader overhaul, fearing that lowering standards could tarnish London’s reputation. They tend to be value investors who seek stable companies that pay handsome, steady dividends — qualities they’re less likely to find in high-growth technology and bioscience companies.
Richard Buxton, a veteran fund manager and head of strategy at Jupiter, says he fears lowering listing standards will attract “bad money” and hurt investors.
He says: “It’s right for London to maintain its high standards to protect investors. That’s what this is about. What we don’t need is a race to the bottom that will entice dodgy foreign companies to list here. If that means they go and list on Nasdaq or Amsterdam then fine, so be it.”
The UK also lacks the retail investment culture that exists in the US. However, that may soon change too. Austin’s recent fundraising review recommended that retail investors be allowed to participate in all fundraising rounds, including those previously restricted to institutional investors.
Mike Coombes, head of regulatory affairs at PrimaryBid, a start-up backed by Japanese investor Softbank that enables UK retail investors to buy shares in listings and other fundraisers, says there are had a “fundamental change in the presumption of retail inclusion in transactions”. » following the exam.
One of London’s quirkier, but seemingly sacrosanct, market rules is preemption: the idea that new shares must first be offered to existing shareholders when companies raise money.
Coombes says preemption is “not universal” – in fact most of the more developed stock markets don’t have it – and adds that the UK could look to France, where the digitalisation of trading platforms Retail investment has dramatically expanded retailers’ participation in fast-moving markets. offers.
Retail ownership of UK equities currently stands at around 15%, compared to around 40% in the US, and PrimaryBid hopes this could rise to around 25% in coming years.
Coombes says: “Reforming the rulebook is one thing, but there are also bigger cultural issues in terms of difficult assumptions about London’s super ‘gold-plated’ rules.”
Many in the city agree. Charles Howarth, a partner at law firm City CMS, says reforms should have been made a long time ago and the premium and standard listing segments have created an “unsatisfactory mess” that had nothing to do with the EU.
He adds: “A major aspect of London’s attractiveness as a listing venue, however, cannot be improved by regulatory change: London investors must learn to welcome growth companies and wean themselves off their dependence on dividends. . The United States shows the value of capital growth by supporting technology companies. »
While John Glen won’t be around to see through the next phase of the city’s reforms – he’s tipped for a promotion to secretary for work and pensions – Liz Truss has promised to scrap swathes of red tape in a bid to to make the Square Mile more attractive.
In a sign that Truss will seek to speed up reforms, John Redwood, an arch-Thatcherite and fervent supporter of deregulation, is set to succeed Glen at the Treasury.
Austin says No 10 and the Treasury “get it”, adding he remains optimistic about London’s prospects.
“Maybe we want to be a regional market, but I think we should be more ambitious than that,” he says.
“We have the opportunity to be the first neutral and independent global financial center between the growing polarity of the United States and China.”
Whoever replaces Glen can expect enthusiastic applause for making that dream come true.
London Stock Exchange battles to avoid irrelevance as bureaucracy overwhelms the city