Don’t turn the City into the ‘best regulated graveyard’, pension funds told

A group of pension funds has been warned against turning the City into the “best regulated graveyard” today after they called for the boss of the London Stock Exchange to stop lobbying for reform of financial services rules.

In the latest of a series of letters to the London Stock Exchange Group (LSEG), a coalition of 87 council pension schemes called for Julia Hoggett, the chief of the London Stock Exchange, to stop pushing for regulatory change and provide evidence for claims that stringent rules were damaging London’s public markets.

“What has been said by the CEO of the LSE, as the chair of the Capital Markets Industry Task Force (CMIT), in respect of the relaxing of the listing regime, does not present the requisite analysis and or evidence that would stand up to market rigour,” Doug McMurdo, chair of the Local Authority Pension Fund Forum (LAPFF), wrote in a letter to Don Robert, the chair of LSEG.

“It is on this basis we remain firm,” he added.

It marks the third such demand after two previous letters did not receive a “formal reply” from LSEG, McMurdo said in the letter. In its previous warning in May, he said Hoggett risked “poisoning the well” of London’s markets by watering down investor protections.

The claims stem from Hoggett’s role as head of CMIT, a group of City grandees that has been banging the drum for reform of City regulation and issuing warnings over the competitiveness of London as a financial centre. 

CMIT, which also counts Peter Harrison, the chief executive of Schroders, and Sir Jonathan Symonds, chair of GSK, among its members, has been at the heart of conversations around the City’s competitveness since its formation in 2022.

Among its campaigns have been a push for greater domestic investment from pension funds and more nuanced debate around the paypackets of City executives. In the past year, regulators have also pushed through an overhaul of listing rules that they concede will introduce more risk to the system.

However, the pension funds claimed CMIT had neglected the views of asset owners and pension funds in its work, warning it risked eroding corporate governance standards in the capital.

The comments triggered pushback today as leading figures in the City defended the work of CMIT and doubled down on the need for reform of the UK’s capital markets.

Mark Austin, a lawyer at Latham & Watkins who sits on CMIT, said the group was “not a regulatory or policy-making body” and its “core purpose is to encourage important conversations” around UK capital markets.

“It has always sought to have big tent conversations on key issues and has actively and extensively engaged with all stakeholders including asset owners,” he told City AM.

Charles Hall, head of research at investment bank, Peel Hunt, added the need for regulatory reform was clear and the group of pension funds risked stifling activity in the Square Mile.

“Corporate governance is important, but there is no point in having the best regulated graveyard,” Hall said. “It is clear that the UK needs to change to ensure that we have an effectively functioning market.”

Responding in a statement to the LAPFF’s previous letter in May, LSEG said it works with “stakeholders from across the UK’s capital markets” to ensure they “are working as best as they can for all participants”.

“Where we believe aspects of the regulatory regime are not working as well as they should, or are hindering activity in our markets, we believe it is our duty to address these by engaging market participants, regulators, and policymakers,” the firm added.