The Financial Conduct Authority (UK Market regulator) has now set out plans to “simplify” UK listing rules. While intentions are honourable (to attract more tech players and start-ups to London), the reform risks lowering corporate governance and conduct standards across the board.
Flexibility to choose which obligations to comply with (opposite to current mandatory corporate governance standards for premium listing issuers) might be seen as an easy fix (“do what you want, just come to London” kind of thing), but in the long run likely to undermine market credibility and investor protection. What lessons of the past decade taught us – reliance on boards and management to self-police might not be the best bet. Except for rare cases, shareholders have not shown to be good enforcers either.
As FCA said, the rules for listing have not changed since the ‘80s, and it’s time to have an open conversation on how the future will look. But why not ask ourselves then – Is the “Comply or Explain” approach still the best model for the UK’s corporate governance? Just look at the meaningless “explanations” which became a routine for companies with mediocre governance standards (“Tick the Box” type of thing which “comply or explain” was designed to eliminate in the first place).
This, coupled with the significantly watered-down Audit Reform Bill (just recently published by the Government), raises the question of how serious Government is in their quest to prevent a repeat of corporate scandals like BHS and Carillion. Politics once again tramped policy.
Where does it leave investors? With the results of regulatory overhaul uncertain, it’s all in investors’ hands: ensuring invested organisations have effective governance processes in place, ongoing monitoring and intervention at the right time are critical for business and compliance alike. The importance of having a robust asset/portfolio conduct oversight program should not be underestimated.
Check this out: UK sets out plans to simplify listing rules to attract more start-ups | Financial Times (ft.com)
