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Pension funds reject IPO market reforms due to reputation risk

Pension Funds
Image credit: William Barton via Shutterstock

UK pension funds have criticised proposals to loosen listing requirements for the London Stock Exchange made by the financial regulator, warning they would undermine investor protections.

The Financial Conduct Authority (FCA) last month proposed reform plans to boost the appeal of the London IPO market to address its recent poor performance.

The FCA proposed making the “listing regime more accessible” by reducing the regulatory burden on companies.

Ten major UK pension schemes have, however, said these reforms would instead harm the reputation of London as a place to do business.

The funds said the proposals would “roll back fundamental investor protections” and therefore called for a pause on the reforms.

The group of pension schemes, which included funds for railway workers, BT, HSBC and the National Employment Savings Trust (Nest), wrote: “We do not think the FCA’s proposed reforms to the UK listings regime will lead to the healthy capital markets we all want.

“We believe that they would in fact exacerbate the current issues by making UK-listed companies less attractive to the kinds of well-informed, long-term investors that our portfolio companies, including several that are looking to list in the next few years, tell us and our managers they are looking for.”

The UK has faced significant pressure to boost the appeal of the London markets, particularly amid a trend of promising UK-based firms opting for IPOs elsewhere.

The FCA came under fire after SoftBank, the owner of Arm Holdings, picked New York as the destination for the Cambridge-based semiconductor designer’s upcoming public launch.

A spokesperson for the FCA said: “Our proposed changes aim to provide a simpler and more accessible UK listing regime.

“Any reform of this market will understandably attract a range of views, which is why we’re conducting an open discussion on the proposals and the shift in risk appetite they’d entail.”

The UK government has stressed the importance of maintaining and improving the country’s attractiveness for high-growth businesses, with regulators being seen by some as a roadblock to these ambitions.

Read more: London’s illiquidity is harming UK tech – but it’s not all doom and gloom