SEC plans could give London Stock Exchange a new lease of life

The US Securities and Exchange Commission (SEC) is exploring changes that could reshape the landscape for foreign companies listed in New York, potentially delivering a significant boost to the London Stock Exchange. Proposals under consideration would mean that foreign firms quoted in New York may soon be required to have a secondary listing elsewhere if they are not already listed on another exchange.

This move could directly impact major players like Arm, the renowned Cambridge-based chip designer currently listed solely in New York. Under the suggested requirements, companies operating as foreign private issuers (FPIs) would need to comply with new regulations that could see them establishing a presence on other markets. The intention is to make New York-listed foreign companies subject to more stringent disclosure and oversight, mirroring expectations set by home markets two decades ago.

The FPI rules historically allowed these companies to avoid quarterly reporting and permitted the use of international accounting standards, making New York an attractive destination for ambitious firms seeking flexibility. Over the years, the jurisdiction of incorporation for these companies has shifted markedly. While most FPIs were previously European firms regulated domestically, the largest number are now based in the Cayman Islands, with a notable concentration of headquarters in China.

Legal experts believe these changes could trigger a surge in secondary listings for London. DLA Piper, an international legal practice, noted that such a development may effectively “turn on the tap” for the London market, which has recently come under fire for losing out to the US in the competition for initial public offerings. Recently, companies seeking higher valuations have begun to abandon London in favour of American exchanges.

If implemented, these rules would have an immediate impact on firms like Arm Holdings, which relies on FPI exemptions to maintain its New York-only presence. The SEC has suggested a new approach as part of an effort to ensure companies are not simply taking advantage of lighter-touch regulation without sufficient scrutiny. Firms such as Virax Biolabs, a Glasgow-based biotech company, have structured themselves specifically to use New York’s FPI regime, often advised to incorporate in the Cayman Islands purely to ease the path to an American listing. Operationally, however, their infrastructure remains rooted in the United Kingdom.

The SEC is currently seeking industry feedback with a consultation period open through early September. Although it remains to be seen when any decision will be made, introduction of these measures could see more companies returning to London or seeking a foothold there, bolstering the UK’s position as a premier global financial centre.