Briefing - Listing rules - FSA's proposals for listing rules.

(From Financial Director)

The Financial Services Authority has been consulting on how to simplify the Listing Rules and how to implement the EU Prospectus Directive. In October 2004, it published a set of draft rules and feedback on its earlier consultation document, CP203, issued in October 2003. This briefing summaries the main proposals.

The regulatory framework will be affected by the adoption of three EU directives: the Prospectus Directive (PD), the Market Abuse Directive (MAD) and the Transparency Directive (TD). They impose obligations on companies that issue securities ("issuers", in the parlance) on regulated markets in the EU, such as the London Stock Exchange, though having shares traded on such markets offers certain benefits, such as the ability to 'passport' across EU borders. Separate rules apply to AIM, which does not have regulated market status; the FSA retains responsibility for the junior market (see Financial Director, Briefing, October 2004).

Currently, many of the rules governing the admission of securities to the Official List of the UK Listing Authority (UKLA) are based on the Consolidated Admission and Reporting Directive (CARD), though the FSA operates tougher 'super-equivalent' standards to provide better investor protection and deeper and more liquid markets. Its consultation suggests that market participants value these higher standards.

Listing Rules changes

Listing Principles: The FSA's current Listing Rules will be supplemented with Listing Principles, intended to ensure fewer "compliance failures" through the spirit as well as the letter of the rules being followed. While the FSA believes that most breaches will relate to specific rules, it says that the Listing Principles will help to take enforcement action against issuers who deliberately circumvent the rules. During the consultation, respondents raised the concern that Listing Principles would be used as an easy enforcement option if a specific rule breach would be difficult to prove. The FSA says it will use enforcement powers reasonably and on a proportionate basis. The FSA has also reworded the proposed rules to eliminate the onerous requirement to take all reasonable steps to ensure compliance.

Listing Principle 2: "An issuer must take reasonable steps to establish and maintain adequate procedures, systems and controls, to enable it to comply with its obligations."