Financial Conduct Authority
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Clearer segments will help improve listing regime

The Financial Services Authority (FSA) yesterday published a feedback statement following its review of the structure of the Listing Regime.  The proposed changes will provide further clarity to the Listing Regime and help maintain the integrity of the UK markets enabling issuers and investors to make informed decisions.

In particular, the paper sets out proposals on how the UK listing regime can be clearly marked out into 'Premium' and 'Standard' so market participants understand the differences in the obligations issuers have to meet.  

Sally Dewar, FSA managing director of wholesale and institutional markets, said:
"Labelling the UK’s listing regime clearly will provide greater transparency about issuers to investors and other market participants and ensure that London remains a major competitor as global markets evolve.

"Our proposals are in response to issues raised during the review which could have an impact on confidence in the UK’s financial markets.  Once implemented, the changes will help maintain appropriate levels of investor protection and ensure that the Listing Regime continues to support the capital raising process."

Under the proposals, Premium Listings will have to meet the UK’s super-equivalent standards which are higher than the EU minimum requirements.  The Premium segment will only be open to equity securities issued by commercial companies and closed and open-ended investment entities.  Standard Listings will cover issues of equities (excluding issues by investment entities), Global Depository Receipts (GDRs) and Debt and Securitised derivatives which are only required to comply with EU minimum requirements.  

Premium and Standard Listings will be open to both UK and overseas companies.

Following the widespread responses from the market, the FSA is also proposing to:

  • Provide a level playing field for UK companies by allowing them to also list on the Standard Listing segment;
  • Ensure greater clarity around the corporate governance disclosure requirements of overseas companies with a Premium Listing;
  • Introduce a new pre-emption rights disclosure regime for overseas companies with a Premium Listing;
  • Maintain the current disclosure regime for GDRs and not require sponsors for issuance of GDRs;
  • Make it easier for listed companies with equity securities to migrate to other categories without first cancelling their current listing; and
  • Extend the Company Reporting Directive’s requirement for an annual corporate governance statement to overseas companies.

To help educate the securities industry on the changes, the FSA will work with a range of market participants to help increase their awareness of the new segmentation and listing categories.
The FSA will consult on changes to the Listing Rules to reflect the proposals and aim to provide feedback in the summer of 2009.

 Notes for editors

  1. The Feedback Statement and Consultation Paper can be found on the FSA website.  The proposed structure of the listing regime can be found on the FSA website.
  2. The FSA’s Discussion Paper 'A review of the Structure of the Listing Regime' published in January 2008 reviewed the structure of the UK listing regime.
  3. A Primary Listing (which will now be labeled a Premium Listing) is the most stringent form of listing in terms of the financial, governance and regulatory requirements or standards available for companies seeking a listing on the FSA’s Official List.  In addition to the minimum requirements of EU directives, a Primary Listed company is required to provide the following: a three-year revenue earning record; an unqualified working capital statement; and prior approval of shareholders before certain key transactions are undertaken by the company.  The company must also appoint a sponsor to advise on key transactions, specifically the company's IPO.  A sponsor firm is typically an investment bank, appointed to advise the issuer on the application of the Listing Rules and to provide key confirmations to the FSA under those rules.  These confirmations drive the additional due diligence provided on a company.  To act as sponsor, a firm must be accredited as such by the FSA.  Once a company has obtained a Primary Listing of its equity securities, the company is then subject to a number of ongoing obligations, including informing the market of material changes and corporate governance of the company.
  4. Requirements for a Secondary Listing (to be relabeled a Standard Listing) stem from the minimum EU Directives standards contained in the Prospectus and Disclosure and Transparency Rules and Consolidated Admissions and Reporting Directive (CARD).  These companies must publish in the UK all circulars, notices, reports and resolutions and notify a Regulated Information Service when they have done so.  The standards for GDRs, Debt securities and Securitised Derivatives which will also belong to the Standard Segment are similar.
  5. 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 as the UK Listing Authority is the UK competent authority for listing.
  6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

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