Investors call for tighter London listing rules Asset managers are putting UK regulators under pressure to tighten standards on listings, warning that standards of corporate governance have been compromised by some new entrants to the London Stock Exchange. The Financial Services Authority launched a consultation in January on proposed changes to the listing rules. Mooted amendments included clamping down on reverse takeovers to avoid their being used as a "back door" route into the FTSE 100, as well as giving minority investors greater power to veto resolutions. The Association of British Insurers response calls on the FSA to go further, voicing concern that "an erosion of standards of listing in recent years ... has impacted on the quality of the leading UK stock market indices to the detriment of savers and investors." Michael McKersie, assistant director of capital markets at the ABI, said that a recent "pattern of issuance has caused concern," including several flotations by foreign-based natural resources companies in which existing shareholders retained an overwhelming majority of the equity. The ABI, which represents more than 300 UK institutional investors, did not name the companies that caused it concern. Among the most controversial recent premium listings have been of foreign-based natural resources groups including Glencore and Evraz, which immediately entered the FTSE 100, after being granted a waiver on the usual FSA requirement that companies on the LSE should have a minimum free float of 25 per cent. After investors raised concern about these and other listings, FTSE said that from January all companies entering the FTSE 100 index would need to meet the 25 per cent benchmark. The make-up of the FTSE 100 is particularly important for investors in tracker funds that invest in the stocks included in the index. Mr McKersie said that the FSA should consider imposing a free float requirement of 50 per cent for all LSE-listed companies, to ensure that the interests of minority investors were not compromised by excessively influential majority shareholders. The ABI's warning - which followed a similar intervention by the National Association of Pension Funds in December - was echoed by senior figures in the asset management sector. "The LSE has tended to compete by pushing for more flexibility," said Karina Litvack, head of governance at F&C. "The voice of the investor is definitely a minority in that decision-making." She added that she had attended a conference overseas where executives had agreed on the merits of a New York listing over a London one, because the strictness of US corporate governance rules was seen as a "badge of honour." Companies should be required to spend a substantial period on Aim or with a standard listing on the LSE's main board before qualifying for a premium listing and FTSE 100 membership, Ms Litvack added. A senior figure at another large asset management group said that FTSE should take a more "qualitative" stance on allowing companies to join the FTSE 100, in line with the assessment of the "suitability" of each company admitted to the S&P 500 index in the US. But the person added that FTSE's selection process could be affected by the fact that it is owned by the LSE, which bought the 50 per cent of FTSE that it did not already own from Pearson in December. "There's an interesting conflict of interest with FTSE being owned by the LSE, which wants to generate listings," he said.