A group representing fund managers around the world has made a last-ditch appeal to regulators, in a bid to head off reforms to the UK listings regime they believe could expose investors to “unnecessary risks”.

The International Corporate Governance Network (ICGN) has made the appeal in an open letter as the Financial Conduct Authority (FCA) considers finalising reforms thought to be the most far-reaching in decades.

The letter—signed by a number of investor groups from around the world—was published this week and targets FCA proposals to lift the need for companies to impose “sunset clauses” (an agreed end date) on dual-class shares and for investors to vote on key company decisions.

“We would strongly suggest the FCA considers retaining these critical protections,” the letter says.

On dual class shares, it says that “academic evidence points to there being no benefit to company value from dual class structures lasting more than seven years,” and asks for sunset clauses to last that long.

The letter adds: “We also strongly believe that the votes on significant transactions and related party transactions provide useful protections for investors and that removing them exposes unnecessary risks.”

The FCA proposals follow growing fears about the waning competitiveness of London listings. In particular, they aim at addressing the popularity of dual-class shares among founder chief executives, especially those in large tech companies coming to market for the first time.

ICGN has already completed an consultation response, but published its open letter following reports that the FCA would push ahead with the proposals unchanged.

Categorical change

Among the key changes set to take place is the removal of the premier and standard categories for listed companies, to be replaced by a single category. In 2021, dual class shares were permitted for premier companies, but they came with conditions, including a sunset clause of ten years.

The new proposals also see a switch from a rules-based listing regime to a “disclosure-based” approach, which leans on companies reporting “material” information rather than following a detailed rulebook.

The FCA is expected to consider the reforms at a meeting on 27 June, though the Financial Times reports it will likely make no announcement until after the UK general election on 4 July. Consultation has been underway since December.

The reforms come alongside general lobbying to lighten the regulatory loads on companies listed in London.

The Capital Markets Industry Taskforce (CMIT), a lobby group, successfully persuaded government last year to abandon new disclosure measures already agreed and set to come into force, much to the frustration of many pushing for reform to governance focused on corporate reporting and audit.

CMIT is chaired by Julia Hoggett, chief executive of the London Stock Exchange, who has also campaigned hard for higher chief executive pay.

Last month, she gave a speech in which she said remuneration committee chairs were more willing to risk shareholder revolts to offer CEOs increased pay, or as Hoggett put it, they are more willing to sit on the “naughty step”.

Figures from Georgeson, a shareholder advisory firm, suggests AGM shareholder revolts on pay had, in fact, fallen in the first five months of this year.

A debate continues to rage about the competitiveness of London over other markets, with disagreements persisting over the need to lighten, or reduce, the governance burden. A new listing regime from the FCA will be the next big step in shoring up the City. Whether it works in the face of tough global competition remains to be seen.