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The City minister and the chief of the London Stock Exchange have hit back at pension funds over their complaints that proposed changes designed to make the UK more attractive to public companies would water down investor protections.
The Financial Conduct Authority has set out reforms it hopes will encourage more companies to list their shares in the UK following concerns that red tape was pushing businesses into private hands or to other exchanges, particularly New York.
Ten of the UK’s biggest pension funds, including Railpen, the Universities Superannuation Scheme and Nest, warned in a letter to the FCA earlier this week that the overhaul risked having the opposite effect, claiming it would damage “fundamental investor protections”.
But Andrew Griffith, City of London minister, on Thursday rejected the complaints, telling the Financial Times that many of the pension schemes had invested in companies listed in other markets with similar rules to those being proposed by the FCA.
“The reason we consult is that we value the views of counterparties — it’s a delicate ecosystem,” he said. “However, what we are seeking is a level playing field [with other listing venues]. We’re not looking for novelty.”
“I do put it back a bit to Railpen and universities and others: if you have a particular view about a governance model that works for you that’s fine, but are you not also investing in US companies that have a very different model?” he said.
“Those same companies and same funds . . . will happily go and invest in overseas markets without holding them to the same standard of governance,” he added
Julia Hoggett, LSE chief executive, also defended the proposed reforms, which include allowing dual-class share structures that give company founders greater voting rights than ordinary shareholders.
“[At the moment] we are setting extraordinary demands on companies listed here that are not academic jurisdictions,” she told a conference hosted by TheCityUK lobby group on Thursday.
“The vast majority of those institutions that are saying ‘We don’t want change’ direct more of their pensioners’ money into companies listed overseas, that have exactly the rules that the FCA is trying to move to, than they do into UK companies. So their actual money isn’t making that point,” she said.
“We need to make sure that we have a level playing field for companies to choose where they want to get access to their capital . . . There is no point in having a theoretically perfect market that people don’t use.”
The concerns raised by the 10 pension funds, which oversee a combined £300bn of retirement savings, were accompanied by similar objections from The Pensions and Lifetime Savings Association, the trade body that represents UK retirement funds with assets of £1.3tn.
The proposed reforms, which were open for public consultation until Wednesday, also include removing a requirement for companies to have three years of audited accounts before floating their shares.
The FCA has also proposed merging London’s standard and premium markets into a single category and removing compulsory shareholder votes on certain significant transactions.
Diandra Soobiah, head of responsible investment at pension scheme Nest, said the UK had long been “the gold standard” for well-run companies.
“Weakening the listing rules . . . will likely dissuade investors from going into listed UK companies because it will be more challenging to act as effective stewards of their assets,” she added.
