* Review recommends dual shares, lower free float
* Listing rules for SPACs should be liberalised
* Sunak says high governance standards safeguarded
* Annual 'State of the City' report to parliament
* Fundamental review of prospectuses
* Regulators should have competitiveness objective
LONDON, March 2 (Reuters) - Britain will modernise its
listing rules to attract more high-growth company and so-called
blank cheque flotations, Finance Minister Rishi Sunak said after
a government-backed review said London was on the back foot
The London Stock Exchange is facing tougher competition from
NYSE and Nasdaq in New York, and from Euronext in Amsterdam
since Britain fully left the European Union on Dec. 31.
In a bid to keep London globally competitive, Sunak
commissioned a review of listings rules in November. It was led
by former European Commissioner Jonathan Hill and published its
recommendations on Wednesday.
"I'm keen we move quickly to consult on its recommendations,
cementing the UK's reputation at the front of global financial
services," Sunak said in a statement.
The Financial Conduct Authority (FCA) said it will act
quickly, where appropriate. It will publish a consultation paper
by the summer and seek to make "relevant" rules by late 2021.
The government faces pressure to act and announced a
fast-track work visa scheme last week for fintechs after swathes
of euro stock and swaps trading left London for Amsterdam and
Nicholas Holmes, head of equity capital markets Ashurst law
firm, said there was little in the review that could not have
been done before Brexit.
Hill said "the composition of the FTSE index makes clear
another challenge: the most significant companies listed in
London are either financial or more representative of the 'old
economy' than the companies of the future.
He added that there was a sense that the financial sector is
on the "back foot" due to Brexit and competition from Amsterdam.
ShareSoc, which campaigns for individual investors, said the
high standards of the UK listings market should be preserved and
Hill said his recommendations were not "radical new
departures" to seize competitive advantage, but about closing a
gap which has already opened up with existing practices in the
United States, Asia and Europe.
British business veteran Martin Sorrell said the review
signalled that the government's competitive "'Singapore on
Thames' vision for a post-Brexit Britain is on the way to
becoming a reality".
Sorrell, who founded and built global advertising agency
WPP, said this approach would serve to keep "our brightest minds
and best ideas" in Britain.
'STATE OF THE CITY'
Two changes seek to move London in line with New York and
other financial centres by allowing founders to list their
company while still retaining significant control.
Hill recommends allowing dual class share structures to give
directors and founders enhanced voting rights on certain
decisions for five years, a move retail investor groups say is
contrary to the "one share, one vote" principle.
The minimum "free float" or amount of a company's shares or
in public hands would be cut from 25% to 15%.
"If you allow a group of owners to have enhanced ownership
rights, it could lead to companies misbehaving in terms of
corporate governance," ShareSoc director Cliff Weight said.
Hill also recommends liberalising listing rules for special
purpose acquisition companies or SPACs. Flotations of these
"blank cheque" companies in New York have surged over the past
year, with Amsterdam also attracting some recently.
The prospectus, used by companies to set out their initial
or secondary offer of shares, should also be fundamentally
reviewed to make a listing faster and simpler, Hill said.
Hill said regulators in Australia, Singapore, Hong Kong,
Japan and the EU have an objective to maintain financial sector
competitiveness and this would help Britain's FCA as well.
There should also be an annual "State of the City" report
form the finance minister to parliament on the financial
sector's competitive position.
"Continuing to evolve the UK listings regime is key to
providing flexibility for companies who want to list in London
while maintaining high standards of corporate governance," said
David Schwimmer, chief executive of the LSE Group.
(Additional reporting by Abhinav Ramnarayan; Editing by David
Evans, Louise Heavens and Alexander Smith)