UK To Clamp Down on Listings That Pose Challenge to National Security

Summary

  • Rishi Sunak to come up with laws for blocking companies from being listed on the LSE on the grounds of national security threat.
  • The Chancellor of Exchequer would start deliberations on the proposals next month itself.
  • The plan would lead to some listings being transferred to the National Security Council.

UK’s Chancellor of Exchequer, Rishi Sunak, is expected to propose norms that would enable the blocking of companies from being listed on the London Stock Exchange on the grounds of a national security threat.

Sunak would start deliberations on the proposals next month itself. The move is said to be a step towards improving the reputation of the Square Mile by cleaning it up. The new rules would authorise ministers to have more power to intervene under suspicion that a floatation might go against national interests.

The move comes after concerns that current rules let Russian oligarch Oleg Deripaska, subject to US sanctions, to get his energy company EN+ Group International Public Joint-Stock Company (LON: ENPL) listed in 2017.

A Treasury spokesperson said that the UK’s reputation of a transparent market is why it is attractive as a global financial centre. In order to strengthen this image, the government would block listings that threaten national security, and it would begin consultations to come up with the design of the new rule in the coming months.

Currently, a company’s eligibility to get listed on the London Stock Exchange is decided by the UK Listing Authority, which is a part of the Financial Conduct Authority (FCA). However, Sunak’s plans would lead to some listings being transferred to the National Security Council.

For long, campaigners have been arguing that more tightening of rules was necessary to protect London’s global status. But leaders from the financial sectors also fear that such rules could hamper foreign investment as London is one of the global financial nerve centres.

Also read: Excited about investing in IPOs? Here are few dos and don’ts

The government has been trying to boost the listing regime, which is part of the reforms to make London more attractive as a financial hub after Brexit. The government plans to allow founders of companies to have greater control while listing their businesses in London, as well as changing rules around blank-cheque companies.

While on the one hand, the government has been planning stricter screenings for certain listings, on the other, UK regulators and the government have been trying to liberalise some elements of the stock market.

The suggestion to block listings was first put in a Treasury document titled Economic Crime Plan in 2019. In the same year, a select House of Commons Treasury Committee said that a body like FCA would not be able to recognise a national security threat by itself even if it was authorised to and block it.

Also read: SPAC IPOs top US$100 billion in 2021

 

According to Bloomberg’s data, London is the choicest listing venue of the year as it is set to see over $10 billion worth of IPOs this year. It is only behind New York, which raised about $72 billion, and Hong Kong, which saw listings worth nearly $21 billion.

The FCA would also be easing listing norms for what is known as blank cheque companies. London is trying to utilise its post-Brexit freedom to make the most of the growing Spac (Special purpose acquisition companies) frenzy. These are shell companies that are floated on the market before finding a takeover target. New York has made the best from the Spacs wave.

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