Potential US rule changes could result in more London listings

On 4 June 2025, the US Securities and Exchange Commission (Commission), which oversees securities trading in the United States, issued a draft paper (known as a concept release (Release)) and sought public feedback focused on whether and how to amend the current eligibility criteria for foreign private issuer (FPI) status under the US securities laws.

Since the framework was first introduced in 1935, the Commission has acknowledged that foreign companies operate under different legal systems, business practices and market conditions. To accommodate for these differences, the Commission provided non-US companies that met certain criteria with significant exemptions from its robust disclosure, filing and corporate governance requirements when they registered with the Commission. This relief was premised on the Commission's understanding that most FPIs are subject to “meaningful disclosure and other regulatory requirements in their home country jurisdictions” and that their securities are also traded in foreign markets.

Many of our clients will be aware of the benefits of FPI status, a more in depth look at which can be found here.

In response to changes in the FPI population over the past two decades, including the rise in FPIs with listings only on US exchanges and an increase in issuers incorporated in jurisdictions with limited regulation, the Commission is now considering revising the definition of a FPI to narrow the types of issuers that may benefit from the FPI framework, while continuing to protect US investors and promote US capital markets. Please see our prior blog post on the rationale behind the Commission’s review for more detail. Comments solicited by the Release must be received by the Commission on or before 8 September 2025.

In this alert, we discuss the Commission's proposed approaches to redefining FPIs and the potential benefits that a secondary listing on the London Stock Exchange (LSE) may have for companies seeking to maintain FPI status under any potential new rules or that a primary LSE listing may have for companies considering a US listing as an FPI in the future.

 

Potential changes to the definition of a FPI

The Commission has requested feedback on a number of potential approaches to revise the FPI definition. Several of these proposed changes are premised on the issuer being listed or incorporated in a jurisdiction that would subject the issuer to substantial regulation. These include:

• Adding a major foreign exchange listing requirement that would require FPIs to have a secondary listing on a “major” non-US exchange. As part of the consultation, the Commission is seeking input on which foreign exchanges will qualify as “major”. London is very much expected to be such a major market (whether it would include both the Main Market and AIM is unclear), if it wasn’t, this would be a significant blow for London. This assessment will likely consider predefined criteria around market size, corporate governance, disclosure standards, and enforcement.

• Adding a foreign trading volume test that would require FPIs to maintain a minimum percentage of trading volume outside the US over a 12-month period, in addition to other existing criteria. The Commission specifically noted its experience with the “primary trading market” requirement under Rule 12g3-2(b) under the Exchange Act.

• Incorporating a Commission assessment of foreign regulation applicable to the FPI which may require FPIs to be based in jurisdictions with robust, Commission-approved regulatory frameworks.

• Establishing new mutual recognition systems which could implement a mutual recognition framework for FPIs from specific jurisdictions, akin to the existing MJDS model with Canada, to streamline Securities Act and Exchange Act compliance.
  
  

Potential benefits of a London Stock Exchange listing

For companies currently qualifying as FPIs and at risk under these potential new scoping requirements – or those considering a US listing under the FPI framework – listing in London could be a strategic consideration to respond to any tightening of FPI eligibility requirements, whilst acknowledging there would be an associated incremental cost implication.

The LSE is a globally recognised, well-regulated market that would almost certainly meet any revised FPI criteria for foreign listing, trading or regulation. It is generally considered to be a major securities market and is already recognized by the Commission for a number of purposes such as, for example, a designated offshore market under Regulation S. The Commission and the UK Financial Conduct Authority have a history of cooperation in supervisory and regulatory matters. In the Release, the Commission noted that one change over the past two decades was a shift in the jurisdiction of incorporation of most FPIs away from the United Kingdom and Canada towards other jurisdictions such as the Cayman Islands and the British Virgin Islands.

Companies looking to list on a US exchange under any new FPI regime may wish to consider a listing on the LSE. A London listing itself provides significant global visibility and access to a broad spectrum of potential investors; it is also likely to meet future Commission requirements for foreign listing, trading or incorporation under any revised FPI definition, potentially providing access to US markets with less onerous disclosure requirements compared to those imposed on US domestic issuers. For example, only needing to report bi-annually as opposed to quarterly, and, if listed on AIM, not requiring shareholder approval of executive remuneration.

As such, the LSE may be particularly attractive to companies seeking to achieve or retain FPI status in light of the potential regulatory changes.