By Chris Vellacott and Kylie MacLellan
LONDON, July 11 (Reuters) – An investor group whose members
manage assets equivalent to a quarter of the value of the UK
economy has called for listing rules to be changed to better
protect minority shareholders.
The Association of British Insurers (ABI), whose members
manage nearly $3 trillion of assets, said on Thursday it wanted
companies listing on the London Stock Exchange to make
more information available more quickly to all investors.
It also wants tougher rules on how majority stakeholders
conduct and disclose their business with their companies.
Robert Hingley, ABI director of investment, said its report,
based on a survey of investors and bankers, had met a
“sympathetic” response among regulators and in government.
However, some in the industry thought it added little to
previous debate, or were sceptical whether much would change.
“All of these things would be good but I’m not totally
convinced how achievable they are,” said Julian Chillingworth,
chief investment officer at investment manager Rathbones
.
“Will the members of the ABI back them up by saying they
won’t apply for an issue if they don’t think it’s being handled
in the right fashion or it’s a minority stake being placed?”
The UK Listings Authority (UKLA) ran a consultation on
potential changes to listing rules late last year and is still
in discussions with those in the market on how they can be
improved. It plans to report back over the summer and was not
immediately available for comment on the ABI’s views.
Investigations into alleged irregularities at
Kazakhstan-focused miner ENRC, listed in London in
2007, and Indonesia-orientated Bumi, listed in 2011,
have put a spotlight on listing rules.
Both were hit by shareholder battles that have battered
their shares, raising questions about how they came to market.
BALANCING INTERESTS
The ABI report was commissioned after a government-backed
review compiled by economist John Kay in July 2012 questioned
the effectiveness of Britain’s equity capital markets.
Many of the ABI’s suggestions, such as fewer banks running
each deal and greater transparency on fees, echo those made by
U.S.-based fund manager BlackRock in 2011 after a run of
troubled deals strained relationships in the market.
Little has changed in the way sales are run since then, yet
new listings in London have picked up significantly this year,
buoyed by rising stock markets.
The ABI proposed that sale prospectuses should be published
earlier in the month-long process, giving investors more time to
prepare for meetings with company management and for independent
analysts not connected with the sale to compile their own
research.
“That is bold, that is interesting. That is a concrete
improvement,” said one senior equity capital markets banker, who
was otherwise unimpressed by the ABI’s report.
“The rest is very woolly,” he added.
Bankers have argued the UK’s rule that companies must float
at least 25 percent of their shares when joining the market has
encouraged some companies to head to the United States, where
there is no such requirement.
The ABI stood by that rule, saying a minimum 25 percent
free-float would ease investor concerns about liquidity and
governance. It also said that if placing greater obligations on
majority shareholders discourages company owners unwilling to
take on more liabilities from listing in London it would be “a
good outcome for the quality of companies that list here”.
But others cautioned against putting the UK stock market at
a competitive disadvantage.
“It’s good to be having the debate,” said James Campbell,
Partner at law firm Pillsbury.
“But in the long term you have to balance the interests …
We don’t want to ruin the market for ourselves by creating
barriers to entry that are higher than other markets.”