FSA Publishes A Review Of The Structure Of The Listing Regime

by Amanda Banks, Tax-News.com, London

14 January 2008

The Financial Services Authority (FSA) has this week published a Discussion Paper reviewing the structure of the UK Listing Regime. The paper discusses ways to re-label the Primary and Secondary listing segments to help participants in the markets understand better the obligations on issuers of the various types of listed securities.

According to the FSA, the UK market has remained very successful, while global markets have undergone a period of significant change. The Listing Regime is a key element of the UK market's success, as is its strong international focus.

London has increased its share of the global initial public offering (IPO) market in recent years, and the UK continues to attract considerable numbers of overseas issuers, which the FSA welcomes.

The paper is seeking views on how the Listing Regime can best support the competitiveness of UK Capital Markets, while protecting investors appropriately.

Sally Dewar, FSA Managing Director of Wholesale and Institutional Markets, explained that:

"In an increasingly competitive global environment, we are committed to ensuring the Listing Regime makes a full contribution to the continued international success of UK capital markets while keeping pace with changes in global markets. We welcome a full and open debate on this issue."

An UK listing is often seen as symbolising a distinctive set of standards, separate from those attaching to other 'listed' markets elsewhere in Europe, and to 'non-listed' markets.

Primary Listed securities are governed by provisions which are 'super-equivalent' to the requirements of the appropriate European Union directives, while the provisions for Secondary Listed securities and Global Depositary Receipts (GDRs) are in line with the minimum EU requirements.

To continue the Listing Regime's contribution to the success of UK markets, the paper sets out a new structure for the regime in which securities subject to higher standards will be more clearly separated from directive minimum standards.

It proposes re-labelling Primary Listing 'Tier One Listing' and Secondary Listing and GDRs 'Tier Two Listing'.

Alternatively, it suggests reclassifying Secondary Listing and GDRs. The securities would continue to be admitted to trading and subject to appropriate EU directive based obligations, but they would not be 'Officially Listed' by the FSA.

UK companies are only eligible for a 'super-equivalent' Primary Listing and not Secondary Listing. This means that UK companies are treated differently, as overseas issuers can choose between which of the two regulatory regimes they list under.

The paper explores proposals to relax these restrictions and create a level playing field for both overseas and UK issuers.

The paper also asks whether there would be greater clarity if Primary Listed companies were all subject to the same corporate governance requirements, be they UK or overseas issuers.

Currently, overseas companies must disclose whether or not they comply with the corporate governance regime in their country of origin and disclose the significant ways in which their corporate governance practices differ from those in the Combined Code.

The paper seeks views on whether requiring overseas companies to 'comply or explain' against the Combined Code would lead to substantive changes in behaviour by investors and issuers.

The paper further notes that the FSA has increased the regulatory resources devoted to the oversight of the GDR market, in line with its relative growth in recent years. The GDR market is a specialist market, not typically accessed by retail investors.

While the FSA will keep this area under review, and invites views in the paper, the FSA is not proposing further regulatory changes at this time, it explained.

The paper asks for comments by 14 April 2008. A feedback statement is then expected to be published around Q3 2008, and a consultation paper with detailed rules will follow subsequently.

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