The Chancellor of the Exchequer Responds to the Listing Review

Dechert LLP

[co-author: Antony Vitanov]

Following on from the recent Hill Review of the UK Listing Rules and its recommendations (click here to read our summary), we reported on the UK Financial Conduct Authority’s (“FCA”) response (click here to read our summary) and how the proposed changes might affect the SPAC market. On 19 April 2021, Rishi Sunak, the Chancellor of the Exchequer, made a ministerial statement detailing how the UK Government is aiming to respond to and implement the Hill Review’s six key recommendations directed towards HM Treasury (“HMT”).

This OnPoint summarises the key points from the Chancellor’s responses to the Hill Review’s recommendations for changes to be made by HMT.

‘State of the City’ report

The Hill Review recommended that the Chancellor should present an annual report to Parliament on the ‘State of the City’, setting out the steps that have been taken or are to be taken to promote its attractiveness as a global financial centre. The Chancellor has accepted the recommendation and has said that the first such report will be presented in 2022. Assuming that the Hill Review-proposed content of the report is followed, it is likely to focus on key performance indicators such as IPOs, volume of capital raised, trading volumes and inward authorisations, while commenting on what has worked and what can be improved.

‘Growth’ or ‘competitiveness’ objective for the FCA

The Hill Review proposed that HMT considers an additional ‘growth’ or ‘competitiveness’ objective for the FCA, which would provide it with sufficient scope to play its part in building an attractive and competitive environment for companies looking to list by being able to tighten or relax regulation to achieve this. The Chancellor announced that the Government will consider this recommendation together with its current review of the stakeholder responses received in relation to the Future Regulatory Framework Review’s consultation and will use these to inform a second consultation later this year.

Review of the UK’s prospectus regime

The Hill Review recommended a review of the UK prospectus regime (including separating prospectus requirements for admission and offers to the public; changing prospectus exemption thresholds; and the use of alternative listing documentation where appropriate), considering whether secondary listings in the UK can be facilitated by the use of prospectuses drawn up under other jurisdictions’ rules and the provision of forward-looking information by issuers in prospectuses. The Chancellor announced that these recommendations are strongly welcomed by the Government and that it will hold a public consultation on the UK’s prospectus regime later this year.

Improving the efficiency of further capital raising and improving retail investor involvement

With respect to improving capital raising for existing listed issuers, the Hill Review recommended that a working group is established, to allow a review of the rules to improve the efficiency of secondary offers by listed companies and suitably recognise pre-emption rights. In agreement with this recommendation, the Chancellor has instructed his officials to consider what form this committee will take over the coming weeks.

On the question of how the use of technology can better involve and engage retail investors in corporate actions and the adoption of an appropriate stewardship role, the Department for Business, Energy and Industrial Strategy will take this into account as part of its consideration of the findings from the Law Commission’s recent scoping study on intermediated securities later this year.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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