The London Stock Exchange Group (LSEG) has reiterated its belief that the listings regime is in need of reform, following stiff criticism last week that there was little evidence to suggest reforms were needed.

The Financial Conduct Authority is currently consulting on a range of reforms to make listing easier in the hope of attracting more big companies to float on the London Stock Exchange. The changes include a single listing category (instead of two) but also moves that would make it more attractive to have dual-class shares.

An open letter from the Local Government Pension Fund Forum (LAPFF) took aim at the reforms and also at proposals made by the Capital Markets Industry Taskforce (CMIT), a lobby group, which is led by London Stock Exchange chief executive Julia Hoggett. Hoggett has led calls for increased pay levels for UK-based chief executives.

In comments aimed at defending the FCA proposals, LSEG this week said it worked for “stakeholders”, to ensure UK markets work for “all participants”.

“Where we believe aspects of the regulatory regime are not working as well as they should, or are hindering activity in our markets, we believe it is our duty to address these by engaging market participants, regulators and policymakers.”

LSEG adds that no reforms for the listings regime in 40 years has left “UK capital markets unduly constrained” compared with other markets.

“We see the reforms proposed by the FCA as a good balance between empowering investors through good disclosure without preventing companies from accessing our markets due to unnecessarily onerous eligibility requirements.”

Relaxing the rules

Among the key proposals from the FCA are a “disclosure-based” regime that would allow companies to report details of major transactions, rather seek regulatory approval; removal of the need for sunset clauses on dual-class shares; relaxation of the rules on who can hold dual-class shares; and changes to the definition of “related party” to reduce regulatory supervision.

The LAPFF also aimed criticism at proposals from the CMIT, who persuaded the government to U-turn on planned new reporting regulations last year. The CMIT also argued for an end to the rule that has companies report shareholder revolts of 20% or more to the Public Register run by the Investment Association, a trade body for fund managers.

CMIT has called for a “reset” of governance in the UK .

LAPFF said in its letter: “It is important that public policymaking is evidence-based. However, we are concerned that the positions being taken by CMIT are neither evidence-based nor balanced, and some positions have little credibility in basic terms.”

The letter adds: “In lobbying to lower the governance and listing regime the LSE not only risks loss of its reputation, but also ‘poisoning the well’, making the UK an unfavourable place to allocate capital.”

There have been other warnings against easing current governance standards.

The International Corporate Governance Network (ICGN) said the “weaker voting rights” that the reforms imply would “inhibit investor influence”.

Last year, a proxy adviser, Minerva Analytics, criticised the CMIT over its assault on the Public Register, dubbing the proposals “regression to the lowest common denominator of shareholder exploitation”.

The debate over regulation and governance for UK markets continues. With a general election on the horizon, a new government in London may have entirely different priorities for the UK market.