A group of UK pension schemes have written to the Financial Conduct Authority (FCA) to raise concerns over its proposed listing rules, warning that the proposals could be “detrimental” to firm value and lead to worse outcomes for members.

The signatories to the letter were: the Asset Owner Council UK Corporate Governance Group, London Pensions Fund Authority, the Church of England Pensions Board, People’s Partnership, the Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC), the West Yorkshire Pension Fund and Brunel Pension Partnership.

The letter argued that while the FCA Board is expected to confirm the revised UK listing rules “shortly”, neither the evidence base, nor the views of investors, nor the impact on savers have been taken into account in the latest proposals.

In addition to this, the signatories said that whilst they want to see the UK “continue to thrive” as a global financial centre, they do not think that the new listing proposals will lead to the healthy capital markets “we all want”.

“Instead, we think they will make the UK less appealing as a destination for capital, exacerbating the current issues by making UK-listed companies less attractive to the kinds of high-quality, long-term investors that both our pre- and post-IPO companies tell us they are looking for," the letter stated.

"In turn, this could raise the cost of capital for UK-listed companies as investors require a higher return for the increased risk.

“We believe that the evidence base – particularly on the kinds of long-term dual-class share structures that CP23/31 would enable – is clear that diluting shareholder rights in this way can be detrimental to firm value even in the near-term. This will in turn lead to worse outcomes for our members.”

This is not the first time that pension schemes have raised concerns over the impact of the proposals, with a total of 10 pension schemes previously co-signing a letter warning that the proposals could risk “undoing stewardship progress” and dilute investor protections.

Give the potential risks to saver outcomes from moving ahead with the current listing proposals, as well as the FCA’s ultimate accountability to parliament, the signatories said that they were “ additionally surprised” by media reports that a final decision on these proposals may be announced just a few weeks after the UK’s 4 July general election, especially given there may be a change in government and the composition of parliament.

“Healthy capital markets need to be attractive both to companies and to investors,” the letter stated.

“We therefore strongly encourage the FCA Board to listen to the investor community, take its time – given its parliamentary accountability – to understand the post-election backdrop and parliament, and retain the critical shareholder rights that have helped the UK build a reputation as the world’s ‘quality’ market and provided it with one of its few key differentiators."

---