The UK’s Financial Services Authority (FSA) has proposed changing free float and corporate governance requirements in a bid to strengthen the country's listings regime.
The suggestions follow a consultation held by the UK regulator in January. The level of free float – currently set by EU law at 25% – is designed to give shareholders sufficient voting power to counterbalance a dominant shareholder.
But the FSA said it did not believe this was a proportionate way to tackle governance issues and noted sell-side concerns that setting the free float threshold too high risks damaging the appeal of London’s IPO market. It instead proposed to detail the circumstances where the minimum free float for premium listings could be reduced – likely to be no lower than 20% – and to remove completely the minimum free float within the standard segment, as long as there is sufficient liquidity.
To bolster corporate governance for listed companies, the FSA has also proposed introducing the concept of a controlling shareholder – backed by a board comprising independent directors – and drafting an agreement to regulate the relationship between a shareholder and a listed company.
“We believe that these proposals will strengthen the investor protections afforded by the Listing Regime, particularly for companies with controlling shareholders,” said David Lawton, the FSA’s director of markets. “Of course, it is primarily the responsibility of shareholders to use these new provisions effectively.”