Norway’s US$1.6 trillion fund voices concern over UK IPO proposals

NORWAY’S US$1.6 trillion sovereign wealth fund warned that the UK’s Financial Conduct Authority’s plan to simplify rules around public listings could undermine investor confidence in the market.

“We are concerned that the FCA’s efforts to boost listings by lowering corporate governance requirements will undermine the UK’s reputation as a market with robust investor protection,” Carine Smith Ihenacho, chief governance and compliance officer at the fund, and Elisa Cencig, head of policy engagement, wrote in a March 22 letter.

The UK’s finance regulator outlined plans in December to replace the standard and premium listings rules with one set of “streamlined eligibility and ongoing requirements,” in keeping with proposals announced in May. The efforts are intended to bolster interest in London’s stock markets, which saw the number of IPOs stall last year.

Companies are drawn to a market by the possibility of getting a higher valuation, Ihenacho and Cencig said in the letter, adding that it is unlikely that corporate governance requirements are a “key factor” and reducing them has the potential to drive up investor costs.

The FCA should reconsider before removing protections including a “mandatory time-based sunset clause for dual class share structures and shareholder votes on related party transactions and significant transactions,” they said.

The fund also raised concerns about scrapping eligibility requirements for companies, while backing its decision to maintain the current regime for controlling shareholders and an overall approach to annual disclosures and reporting requirements for UK governance, climate, and diversity. BLOOMBERG