London Stock Exchange Listing RulesIf you would like to know more, please follow this link to the Becoming listed on the LSE is a complicated process. The London Stock Exchange listing rules that must be fulfilled before a company can 'go public' follow. The process of floating a company and their ongoing regulation is controlled by the UKLA (UK Listing Authority) which is a part of the FSA. The UKLA's listing requirements include: Directors must sign a listing agreement which commits the board to high standards of behaviour and reporting levels to shareholders. The directors must prepare a prospectus (known as listing particulars) to potential investors. At least 25% of the share capital must be in the hands of the public so that the shares can be actively traded and remain reasonably liquid. The company should have at least three years of accounts. The company needs a sponsor (bank, stockbroker or other professional adviser) to guide and advise and to reassure the UKLA that the company is of sufficient quality. Once listed on the London Stock Exchange, the company and directors have continuing obligations, which include: Giving the market any price sensitive information as quickly as possible. To undertake to disclose information fully and accurately. The directors must follow strict guidelines relating to the buying and selling of their own shares in the company.
The rules were updated substantially during the 'Big Bang' in October 1986, although the real impact of those changes was to make London much more friendly for the big international investment banks. It may go without saying, but when a company is floated on the market it will soon find itself quoted in the relevant part of the index. This is based on total market capitalisation and not on length of tenure. Since the index participants are updated quarterly, a company would then be moved into the appropriate index (the FTSE 250 for example). A smaller company with a lower market cap will make way for the entry of the new, larger firm. This means that a newly listed company can be placed into the FTSE 100 relatively quickly if it is large enough. One of the attractions of the Alternative Investment Market, AIM, is that their requirements for public listing are significantly less onerous and therefore less costly. This helps to attract younger and more rapidy growing companies to market. In recent years, the Alternative Investment Market has attracted a number of smaller Russian companies wishing for a public listing. This is in part because of the influx of oligarchs to the UK. It also ought to serve as a potential warning to investors of the reporting standards on this market. Russian oligarchs have not created a reputation for transparency! Whilst there will always be the potential for issues of trust to come to the surface in a large and well established plc, the risks to an investor grow significantly as the size and age of the company concerned get smaller. Investment research is a must for all investors, but the phrase caveat emptor applies even more for a smaller, newly listed company. If you would like to read more about the requirements for a listing in London, please follow this link to the United Kingdom Listing Authority website. Do you want to improve your trading skills? Click here to watch a free online
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