City watchdog to tighten listing rules Rules aimed at cracking down on dominant shareholders and reverse takeovers have been set out by the City watchdog in response to problems raised at miners Bumi and Eurasian Natural Resources Corp, the Financial Services Authority said. The announcement comes days after Bumi, an Indonesian venture that was listed on the London Stock Exchange via a reverse takeover, launched an inquiry into $500m of alleged irregularities at subsidiaries. The plans tighten rules that allow exemptions for takeovers where a company gets a London listing through the back door by merging with a listed group. They also follow controversy last year at Kazakhstan-based miner ENRC, where three billionaire shareholders with a 45 per cent stake influenced the day-to-day running of the group. The proposals will strengthen corporate governance rules by preventing shareholders with more than 30 per cent of equity from running a company like it is their own "personal fiefdom," said one senior fund manager. The FSA added that it would insist on a majority of independent directors on the board of a company with a controlling shareholder. Other proposals will allow the FSA to consider a free float below 25 per cent, if there is sufficient liquidity in the stocks. Last month the government put forward plans to encourage more listings, which included relaxing the rules on the LSE, allowing companies to list as little as 10 per cent of their business, down from a current requirement of 25 per cent. The initiative comes as the government is seeking to avoid losing more technology initial public offerings to the US, following a drought in main market technology listings since early 2010. The City regulator has been working on a range of listing proposals since January, which included conversations with fund managers, trade bodies and banks. The FSA expects to finalise the new rules in the spring after a three-month public consultation. David Lawton, the FSA's director of markets, said: "We believe these proposals will strengthen the investor protections afforded by the Listing Regime, particularly for companies with controlling shareholders." The Association of British Insurers, which represents about 15 per cent of shareholders on the UK stock market, backed the FSA proposals, saying UK investors need to feel they can invest with confidence in listed stocks. However, the National Association of Pension Funds, which also represents about 15 per cent of shareholders on the UK stock market, was critical of the free-float plans, although it backed other proposals. David Paterson, the NAPF's head of corporate governance, said: "We note that almost all buyside respondents argued that the listing rules should include a requirement for a free float of 50 per cent, or even more."