LONDON (Reuters) - The Association of British Insurers (ABI) - whose members manage assets of nearly $3 trillion, or about a quarter of the British economy - wants rules for listing on the London Stock Exchange (LSE.L) changed to protect minority shareholders.
The ABI wants companies to make more information available to all investors earlier and to force existing majority stakeholders to comply with tougher rules on governance, it said in a report on Thursday.
“An information asymmetry exists in favor of issuers and vendors at the expense of investors,” the ABI said.
“Additional responsibilities on controlling shareholders are likely to be helpful in focusing their attention on the disclosure and nature of their relationships with the company and minority shareholders,” it said.
Investigations into alleged irregularities at Kazakh-focused ENRC, listed in London in 2007, and Indonesia-orientated Bumi, listed in 2011, have put a spotlight on these issues. Both were hit by shareholder battles that have battered their shares, raising questions about how they came to market.
Robert Hingley, ABI director of investment, said the report, based on a survey of investors and bankers, had met a “sympathetic” response among regulators and in government.
It was commissioned after a government-backed review compiled by economist John Kay in July 2012 questioned the effectiveness of Britain’s equity capital markets.
Even before the Kay Report, investors and regulators had raised concerns about governance and transparency in the initial public offering (IPO) process.
Meanwhile, parliament’s Committee for Business, Innovation and Skills has invited submissions on the role of mining firms in the economy, examining corporate governance at companies operating abroad but trading on UK exchanges.
The association said that discouraging company owners unwilling to take on more liabilities from listing in London is “a good outcome for the quality of companies that list here”.
Publishing the sale prospectus earlier in the month-long process would give investors more time to prepare for meetings with company management and for independent analysts not connected with the sale to compile their own research, it said.
The ABI also called for fewer banks to be involved in IPOs, making the process of setting a sale price that reflected the value of the company more efficient. Only three banks should run sales worth more than 250 million pounds ($370 million) while smaller deals should be restricted to two institutions, it said.
The association also recommended greater transparency on fees paid for institutions running IPOs and issues of new shares by listed companies.
The UK Listings Authority ran a consultation on potential changes to the listing rules late last year and is still in discussions with those working in the market on how they can be improved. It has said it plans to report back over the summer.
($1 = 0.6691 British pounds)
Additional reporting by Kylie MacLellan; Editing by Louise Ireland