The Association of British Insurers (ABI) has called for a tightening of listings rules, citing recent company issues on the London Stock Exchange (LSE) as harmful to the quality of the UK's regime.
In its response to consultation paper CP 12/2, ‘Amendments to the listing rules, prospectus rules, disclosure rules and transparency rules’, issued by the UK Financial Services Authority (FSA) in January, the ABI said it was concerned that listing standards had eroded in recent years, to the detriment of UK stock market indices and investors. The ABI represents the UK‘s insurance, investment and long-term savings industry. It has 300 members, accounting for investments of £1.5 trillion in total.
“Difficulties have been posed by governance/structure/culture of a proportion of companies gaining a listing in recent time periods as well as the type of business model,” said the ABI document. “The low proportion of shares being floated in the case of some new entrants to the market has accentuated problems.”
In objection to FTSE 100 firms that did not meet the usual LSE standard of a 25% free float, ABI set out its own recommendation for a move to a general requirement for 50% of shares to be in public hands in the medium term, with an immediate move to a free float of at least 25%.
FTSE, which is owned by the LSE, recently stated that it would introduce a 25% minimum free float benchmark, but the ABI criticised the FSA for failing to include a similar level in its own requirements. Instead, the current FSA position is based on the need to ensure “appropriate liquidity” in a listed company’s shares.
“A small minority of current listed companies are a cause of concern,” said the ABI. “But we cannot assume it will remain only a small minority – indeed there has been a relatively high proportion of recent IPOs.”