UK - Companies wishing to float on FTSE indices should be forced to adhere to a free-float threshold of 50%, the National Association of Pension Funds (NAPF) has said.

The association was responding to a FTSE proposal to increase the threshold from its current 5-15% - depending on proposed market capitalisation - to as much as a quarter of shares.

NAPF chief executive Joanne Segars said that while a 25% threshold would be good, 50% would be much better.

In her letter to FTSE chief executive Mark Makepeace, said she supported the increased threshold because the way in which the UK market had "developed" in recent years had affected the interests of pension funds.

She added that there was support for a significantly higher threshold than the one now under consideration.

"We are persuaded that this threshold should be increased to 50% to align it with the requirement for overseas incorporated companies," she said.

"This would eliminate the possibility of overseas companies avoiding the need to have a 50% free float by incorporating in the UK or by using a shell holding company."

Segars said the "reality" was that a 25% threshold would not provide the protection for minority investors to block a majority shareholder resolution, while increasing it to 50% should achieve that goal "over time".

Her comments echo those of the UK's Investment Management Association, which said it strongly believed the threshold should be increased to 50%.

In its submission to the consultation published last month, the UK trade association representing £4trn (€4.7trn) in assets also called on FTSE to prohibit any exemptions from these rules.

"FTSE should be clear that its intention is to ensure minimum standards of governance and shareholder rights," it said.

The NAPF said any changes should come with a two-year transition period to allow "sufficient time to increase" free floats and respond to investor needs.

It added: "There should be a gap between listing and inclusion in the indices. This would allow time for more to be ascertained about a company and an assessment made as to whether it should be included in an index."

The IMA raised a similar point, highlighting the importance of "integrity" within indices - "particularly when inclusion in an index means there is automatic access to the funds of the large passive asset managers".

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