The UK has an internationally successful and innovative capital market. However, the market continues to evolve rapidly and the UK Listing Rules (which were last substantively reviewed in 1993) need a wholesale review. The FSA aims to provide a cost-effective regime that facilitates access to capital markets by a broad range of businesses, maintains market confidence and adequately protects consumers. The FSA discharges this role by setting, monitoring and enforcing a combination of qualitative and disclosure standards at the point of admission to listing and on an ongoing basis.
The impact of the EU Financial Services Action Plan and the review of UK company law will have profound effects on the Listing Regime. Although the outcome should be to raise standards of securities regulation in the EU, there will continue to be opportunities to differentiate the UK markets to sustain their competitiveness and reputation for investor protection.
The Listing Review sets out proposals for strengthening some current aspects of the regime, removing rules that are no longer relevant and introducing new rules to cover gaps in the existing regime.
FSA Managing Director, Michael Foot said: "The proposals contained in this paper aim to ensure that the UK continues to offer an appropriate regulatory regime that is flexible and transparent for capital raising in London and that provides sufficient investor protection. We also want to ensure that, given the changing regulatory environment, the regime continues to meet the FSA's regulatory objectives. We have worked closely with issuers, firms and investors to help us formulate our proposals.
"The Listing regime is a quality brand that is essential to the continued maintenance of London as one of the world's largest and most highly developed capital markets. The regime includes a number of standards that are higher than those proposed in the directives emerging from the EU. The Consultation Paper identifies those that we think most matter, shows how they might be retained and seeks confirmation that this is indeed what the market wants."
PROPOSALS FOR CHANGE
Today's consultation paper contains wide-ranging and radical proposals for reforming the Listing Regime. The key areas for change are:
- Listing Rule Restructuring - to introduce high-level principles that will inform the making and understanding of our rules by firms and will be enforceable like other rules. We intend to amalgamate rules and guidance in a format and style that is consistent with the rest of the FSA Handbook. It will be re-organised into the categories of Equity, Debt and Financial Products;
- Super-equivalence - to consult on the importance of retaining super-equivalent eligibility requirements (containing higher standards than are required by European legislation) for equity issuers;
- Debt Issues - to consult on retaining super-equivalent eligibility requirements in relation to debt issues, including the requirement for an authorised adviser;
- Overseas Issuers - to require overseas issuers with a primary listing to conform to the same standards as UK issuers. Secondary issuers would be required to comply with the European directive standards;
- Operating & Financial Review - to recommend that all listed issuers comply with the proposed OFR regulations, so that listed issuers are at the forefront of good market practice in this area;
- Disqualification of Directors - to consult on whether the FSA should be given the power to disqualify a director who has been involved in a serious breach of the Listing Rules;
- Continuing Obligations - to retain our super-equivalent continuing obligations requirements on UK companies, such as our class test regime requiring equity issuers to obtain shareholder approval for major transactions;
- Shareholder Rights - to introduce a new requirement for companies to obtain shareholder approval where an issuer intends to de-list;
- Model Code - to be streamlined once the Market Abuse Directive implementation measures have been finalised to reduce duplication;
- Financial Information - to implement a more flexible approach to the presentation of financial information, so that companies may include both audited and non-audited figures, provided they disclose the source of information. We also propose to remove the requirements for prospective financial information such as profit forecasts to be 'reported on', except where such information is contained in a prospectus;
- Sponsors - to consult on the options of either retaining the obligation to have a sponsor for new issues and major transactions or abolishing the mandatory requirement. We intend to clarify the regime (whether compulsory or voluntary) and strengthen enforcement against those that fall short of the required standards.
It is the FSA's intention to publish a feedback statement and a further CP with draft rules in the third quarter of 2004. Finalised rules should then be published in spring 2005 for implementation in summer 2005. This is also the earliest date that the Prospectus Directive is expected to be implemented in the UK. We plan to publish a separate Consultation Paper next summer dealing with the Market Abuse Directive and our proposals on the dissemination of price-sensitive information.
Background
- The FSA published its Feedback Statement on DP14on the Listing Review in January 2003.
- The London Stock Exchange is the largest exchange in Europe worth €1828.7 billion as at 31 August 2003 with 2,701 issuers listed on the market. The next largest in terms of value and issuers are Euronext and Deutsche Börse. In 2002 36 new issues raising a total of £4.8 billion in new capital was raised in London and in 2003 to date 8 new issues totalling £1.545 billion have taken place. (Source: Federation of European Securities Exchanges, August 2003 and KPMG Corporate Finance, September 2003)
- The consultation period will run until 31 January 2004. The paper is available at www.fsa.gov.uk/pubs/
- We intend to hold a series of meetings in November and December with interested parties on key topics arising from the Listing Review. We anticipate that these are likely to include:
- super-equivalence;
- issues arising from the dissemination of price-sensitive information; and
- sponsors.
- The UKLA Annual Conference will take place on 5 November this year at Queen Elizabeth II Conference Centre.
- The UKLA as part of the FSA took on responsibility for listing in May 2000.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.
