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Listing rules reforms, Chair of Financial Conduct Authority (FCA)

Listing rules reforms, Chair of Financial Conduct Authority (FCA)

13 June 2024
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Chair Ashley Alder

Financial Conduct Authority

12 Endeavour Square

London E20 1JN

13 June 2024

Subject: Listing rules reforms

Dear Mr Alder,

We understand that the Board of the FCA Board is considering its final decisions on the revised UK listing rules shortly.

While we are aware that the FCA has undertaken a consultation process, we are concerned that the voice of investors, whilst being heard, seems to be being ignored.

Your consultation document CP23/311 notes that investors have expressed strong concerns over the proposed reforms. Despite investors’ concerns, the FCA maintains its proposals, and goes further by removing a key investor protection mechanism: the mandatory time-based sunset clause for dual-class shares.

We have reattached for reference the ICGN’s consultation response, as well as the public statement signed by ICGN, many of our asset owner members and other investor organisations from around the world, urging you to reconsider.

We agree with the goal of a well-functioning and vibrant market but are concerned that this is not the way to achieve it.  Strong shareholder rights and protections are important. Our members are investing hard working people’s savings and pensions, and the UK governance system of accountability to shareholders plays a critical role in protecting those end investors.

We would strongly suggest that the FCA considers retaining these critical protections. On dual class shares, academic evidence points to there being no benefit to company value from dual class structures lasting more than 7 years.[1] Could the UK consider sunsetting clauses after 7 years from IPO? We also strongly believe that the votes on significant transactions and related party transactions provide useful protections for investors and that removing them exposes unnecessary risks.

ICGN, CII, ACGA, ACSI, AMEC, Assogestioni, CCGG, and ICEV stand ready to discuss these issues with you at your convenience, please let us know if you would like to do so.

Yours faithfully,

Jen Sisson, CEO, International Corporate Governance Network (ICGN)

Amy Borrus, Executive Director, Council of Institutional Investors (CII)

Fabio Coelho, CEO, Associação de Investidores no Mercado de Capitais (AMEC)

Louise Davidson AM, CEO, Australian Council of Superannuation Investors (ACSI)

Caroline Escott, Chair, Investor Coalition for Equal Votes (ICEV)

Fabio Galli, Director General, Assogestioni

Amar Gill, Secretary General, Asian Corporate Governance Association (ACGA)

Catherine McCall, CEO, Canadian Coalition for Good Governance (CCGG)

[1] See for instance the paper from Harvard Law School researchers Lucian A. Bebchuk and Kobi Kastiel, the studies from the European Corporate Governance Institute, research from the CII Research and Education Fund (August 2023), former US SEC Commissioner Jackson and Investor Coalition for Equal Votes (ICEV)’s report on “Undermining the shareholder voice”, (2023).

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Listing rules reforms, Chair of Financial Conduct Authority (FCA)

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Listing rules reforms, Chair of Financial Conduct Authority (FCA)

Will Farrell

Federated Hermes
Assistant Manager, EOS
London

Will co-leads the climate change theme at EOS, the stewardship arm of Federated Hermes Limited, where his coverage includes companies in Europe and Australia, primarily financial services, energy, chemicals, and materials. Prior to joining EOS, Will worked in the energy and infrastructure investment banking team at Macquarie Capital, where he specialised in renewable energy. Before that, Will held a number of roles across the UK climate policy space, including as a parliamentary researcher for Rt. Hon. Chris Skidmore MP on climate and energy issues, and as a climate and economic policy analyst at a diplomatic institute. He was appointed as a voluntary adviser to Rt. Hon. Alok Sharma MP, President of COP26, on preparations for COP26 after co-founding a Westminster climate policy group in 2019, which engaged MPs and Members of the House of Lords to advocate for more ambition on climate action in public policy. Will has a Bachelor’s degree (1st Class Honours) in Economics from the London School of Economics and Political Science.