The aim of the listing review is to simplify and modernise the existing UK regime to ensure that it provides an appropriate level of regulation, while retaining and strengthening the many features which have contributed to the integrity and competitiveness of UK markets.
The FSA is consulting on a restructured set of rules and guidance to:
- simplify and modernise the Listing Rules;
- implement the Prospectus Directive;
- ensure that the UK offers an appropriate regime for regulating securities as well as the flexibility and transparency needed by those wishing to raise capital on the London markets, while providing sufficient protection for investors; and
- ensure that the legal and regulatory environment continues to meet its regulatory objectives.
Hector Sants, Managing Director of the FSA's Wholesale Business Unit, said:
"The FSA is committed to maintaining London as one of the world's most attractive capital markets and I believe that these new listing rules are a significant contribution to this goal. We have taken this opportunity to introduce principles for listed companies to align the Listing Rules with the FSA's own principles based approach to regulation, and have also substantially simplified the rulebook."I would like to emphasise the high calibre of input we have received from industry and investors. This has informed our approach on key issues, in particular the area of super-equivalence, where we have removed gold-plating in the debt market and retained key eligibility criteria, and regarding the retention of the sponsor regime for equity issuers.
"I am confident that these revised proposals will be welcomed by both market participants and investors."
CP203 Feedback and Proposals
The feedback received in response to CP 203 supported the FSA's general approach to listing and regulation of the primary securities markets.
In light of industry comments regarding the 'gold-plating' of directives and to reflect concerns regarding competitiveness, the FSA proposes to remove all super-equivalent regulation which currently applies to the debt and secondary listed markets. The market has not requested super-equivalence in these areas and the directives provide an acceptable level of regulation for these securities.
However a significant majority of respondents supported 'gold-plating' the eligibility requirements for primary listed issuers of shares, imposing higher standards than those required by the European Directives. The FSA proposes to retain certain of these provisions which include the eligibility criteria requiring a three year track record and a 'clean' working capital statement.
The key proposals include:
- Listing Principles - revised listing principles which will be enforceable as FSA Rules designed to ensure the spirit as well as the letter of the rules is followed;
- Sponsor Regime - retaining the requirement for sponsors for certain transactions, clarifying the role and obligations of sponsors, toughening up the supervision of sponsors and strengthening enforcement against sponsors who fall short of the standards expected;
- Eligibility - retaining the super-equivalent eligibility requirements, such as the requirement for a 3 year revenue earning track record and a 'clean' working capital statement;
- Continuing Obligations - retaining the super-equivalent continuing obligations requirements, such as class tests and the related party requirements:
- Financial Information - adopting a more flexible approach to the presentation of financial information produced outside the ambit of the Prospectus Directive;
- Model Code - streamlining the Model Code and extending it to persons discharging managerial responsibility;
- Debt and Specialist Securities - aligning the requirements for debt securities with those of the directives and establishing a listing particulars regime for issuers of Specialist Securities to provide flexibility in the presentation of historical financial information;
- Overseas Issuers - bringing the rules for overseas primary listed issuers more closely into line with those for domestic issuers while acknowledging that there are some areas where it is inappropriate for overseas primary listed issuers to comply in full with domestic rules; and
- Re-structuring the rule book to reflect our wider role in the regulation of primary securities markets under the directives. The rules will clearly and separately identify rules derived from the directives while also allowing issuers of different securities types to clearly identify the rules applicable to them.
Prospectus Directive
The key changes proposed under the Prospectus Directive, for which HM Treasury will be publishing the implementation legislation shortly, are:
- Scope of Rules – will be extended to include public offers of securities;
- Prospectus Requirements – will prescribe the contents and format of prospectuses; allowing incorporation by reference; allowing the use of three part prospectuses; setting out the exemptions from the requirement to produce prospectuses;
- Passport Rights – introduces the ability to passport prospectuses on a pan-European basis making it easier for companies to raise capital across Europe;
- Third Country Issuers – determining the home Member State for non-EU issuers
- Approval of Prospectuses – setting out the procedures for approval; and
- Other Provisions – including the requirement for issuers to produce annual information updates and the setting up of a qualified investors register.
Next Steps
The FSA intends to publish the final version of the Listing Rules in Spring 2005 for implementation on 1 July 2005, when the Prospectus Directive will also come into force.
Background
- The FSA published its Consultation Paper 203 - Review of the Listing Regime in October 2003.
- The London Stock Exchange is the largest exchange by market capitalisation in Europe worth £3,222 billion as at 31 August 2004 with 1,845 issuers listed on the market. The next largest in terms of value and issuers are Euronext and Deutsche Börse. In 2003 nine new issues raising a total of £3.5 billion in new capital was raised in London and at the end of August 2004 33 new issues totalling £2.936 billion had taken place. (Source: London Stock Exchange. Figures do not include the AIM market)
- The consultation period will run until 14 January 2005. The paper is available here on our website.
- The FSA Annual Listing Conference will take place on 17 November this year at The Park Lane Hotel (Sheraton).
- The FSA took on responsibility for listing in May 2000.
- The regulatory objectives of the Financial Services Authority in its capacity as the UK Listing Authority are to formulate and enforce Listing Rules that: provide an appropriate level of protection for investors in listed securities; facilitate access to listed markets for a broad range of enterprises; and seek to maintain the integrity and competitiveness of UK markets for listed securities. In pursuing these objectives the FSA will at all times have regard to the general duty set out in Section 73(1) of the Financial Services and Markets Act 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.
