The listing review has been aimed at simplifying and modernising the UK listing regime to ensure an appropriate level of regulation, while retaining and reinforcing all the features which contribute to the flexibility and transparency of the UK's capital raising markets.
Hector Sants, Managing Director of the FSA's Wholesale Business Unit, said: "The FSA has consulted at length with the industry on our approach to maintaining an appropriate regulatory regime for listed securities in the UK. We believe we have achieved this by retaining those higher UK standards valued by the market and underpinning these with listing principles designed to protect shareholders and maintain confidence in a well run and regulated market.
"In response to consultation feedback we have retained a super-equivalent regime providing a higher level of protection for investors in primary listed securities and we have also delivered on our commitment to reduce the regulatory burden, where possible, by paring back the regulatory regime for debt, secondary listing and depositary receipts generally to EU Directive standards.
"The FSA has, I believe, designed a regime which will contribute significantly to maintaining London as one of the world's premier capital raising markets."
CP04/16 Feedback on the Listing Review
The feedback received in response to our proposals in CP04/16 was supportive of the FSA's general approach to listing and the regulation of the primary securities markets.
The FSA has decided to retain a largely super-equivalent regime for primary listed issuers while reducing regulation of the debt and secondary listed issuers to directive requirements.
The key features of the new regime include:
- Listing Principles – designed to ensure adherence to the spirit – as well as the letter – of the rules in the interests of promoting a fair and orderly market;
- Eligibility Requirements – maintaining the requirement for issuers to produce a 3 year revenue earning track record, a 'clean' working capital statement and to be able to demonstrate control of its assets;
- Sponsor Regime – a regime which sets out what is expected of sponsors and reflects the high standards of performance and behaviour for which they are known;
- Continuing Obligations – retaining the super-equivalent continuing obligations requirements, such as class tests and the related party requirements;
- Debt and Specialist Securities – a listing rules regime for issuers of debt and specialist securities based on directive standards with minimal additions and also a choice for issuers of debt and specialist securities of whether a regulated market or the Professional Securities Market (PSM) best suits their situation;
- Re-structuring the rule book – the rulebook has been restructured into the Listing Rules, Disclosure Rules – reflecting the requirements of the Market Abuse Directive – and the Prospectus Rules. Guidance is included where appropriate next to the rule to which it relates.
The FSA will introduce rules requiring an issuer to obtain the approval of 75% of its shareholders who vote at a general meeting before it can apply for a cancellation of its listing. The requirement will apply where an issuer is intending to go private or move to a non-regulated market (such as AIM), but not where it proposes moving to another regulated market. No vote will be required where an issuer is in financial distress and its continued listing would jeopardise its survival.
Statutory Responsibility for Prospectuses
The FSA, following the delegation to it of rule making powers by HM Treasury, is carrying out a month long consultation on establishing who has the responsibility for producing prospectuses.
The key proposals are:
- Retain the requirement for issuers and their directors to take responsibility for equity share prospectuses;
- Require issuers to take responsibility for prospectuses for other securities (including retail and wholesale debt and convertible and exchangeable securities).
Prospectus Directive
At this time the FSA feels that it is inappropriate for it to publish a policy statement or near final rules in relation to the implementation of the Prospectus Directive. This decision was taken as the calling of the General Election prevented the statutory instrument to implement the directive being laid before Parliament rose. It is hoped that near final rules can be published towards the end of May.
Next Steps
The FSA intends to publish near final Prospectus Rules as soon as possible after the regulations are finalised. We intend to make final Listing Rules and Prospectus Rules at the June Board meeting of the FSA. The new rules are due to come into effect on 1 July 2005.
Background
- The FSA published its Consultation Paper 04/16 – The Listing Review and implementation of the Prospectus Directive in October 2004, and its Miscellaneous CP04/08 – Cancellation of Listingin May 2004.
- The consultation period for the Statutory Responsibility for Prospectuses will run until 28 May 2005. The paper is available here on the FSA website.
- The London Stock Exchange is the most international equities exchange by trading in the world and Europe's largest pool of liquidity. In 2004, 80% of all European IPOs floated in London. By the end of 2004, the market capitalisation of UK and international companies on the London Stock Exchange’s markets amounted to £3.5 trillion, with £4.7 trillion of equity business transacted over the year.
- 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 promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve our business capability and effectiveness.
