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The Financial Services Authority (FSA) has today published CP06/21 Investment Entities Listing Review to clarify and seek further views on certain aspects of the original consultation (see note 2). This includes clarifying the importance of a company's investment policy; explaining the FSA's decision to withdraw its proposal to abolish the directive minimum regime for overseas investment companies and; introducing new listing categories to make it clear to investors what obligations a listed company is subject to.
Sally Dewar, FSA Director of Markets, said:
"In seeking to reform the Listing Rules for investment entities, the FSA aims to modernise the UK's regime. This will provide companies with greater flexibility over their investment strategies, while maintaining disclosure-based protections designed to make the regime equally attractive for investors.
"As we said in October the FSA has also decided to retain the directive minimum listing regime for overseas investment companies. In reaching this decision we have taken account of recent market developments and our obligation to have regard to the international character of the UK's markets. We feel, in this light, that it is appropriate to offer international companies a choice of super-equivalent or directive minimum regimes."
Amended Proposals
The March consultation paper proposed replacing the range of old, detailed and prescriptive rules that governed various types of listed investment entities with a single, principles-based regime allowing greater flexibility for investment strategies. Some detailed aspects of the rules needed to be modified in the light of responses but the FSA's general approach and many specific proposals were favourably received by respondents. The key revised proposals include:
- a proposal to remove the prohibition in the Listing Rules on closed-ended funds controlling companies in which they invest, thus allowing these vehicles (for example private equity funds) to pursue a wider range of investment strategies;
- greater clarity on what a primary listed closed-ended fund will have to include in the investment policy it will be required to publish and adhere to; and
- revised proposals on the disclosure of a primary listed investment entity’s risk profile aimed at ensuring investors have sufficient information to evaluate a company's risk profile whilst addressing respondents' concerns that the proposals we set out in CP06/4 were disproportionate.
These changes are aimed at improving the super-equivalent regime for investment entities under Chapter 15 of the Listing Rules.
Directive Minimum Regime & New Listing Categories
The FSA no longer thinks it appropriate to insist that all investment entities are subject to the additional requirements set out in Chapter 15 of the Listing Rules. International companies will now have a choice of directive-minimum or super-equivalent standards.
In light of this change there is a need to make the listing regime clearer, flexible and more comprehensible and as a result the FSA proposes to introduce new categories that more accurately reflect the listing obligations that attach to the different types of listing.
