Proposed changes to the Listing Regime

United Kingdom

On 8 October the Financial Services Authority ("FSA") published a consultation paper which is the latest step in its programme to review the listing regime in the UK, particularly in the light of the forthcoming implementation by member states of the European Prospectus Directive and other directives in summer 2005.

The programme was started in July last year, with the publication of Discussion Paper 14, and in January this year the FSA issued a 'feedback statement' reporting on responses to DP 14 and the FSA's initial thoughts. This consultation paper sets out the FSA's policy proposals for modernising the listing regime, including general proposals for amending the Listing Rules, but no detailed changes to the Listing Rules will be put forward until late 2004.

The main proposals are as follows:

  • Changing the structure of the Listing Rules, by introducing a series of high-level Listing Principles. These would cover matters such a requirement that issuers take all reasonable steps to enable their directors to understand their responsibilities and obligations under the Listing Rules, and establish and maintain adequate systems to ensure compliance with the Listing Rules. Issuers would also be required to ensure equality of treatment for all holders of the same class of listed securities, to act with integrity in their relations with holders and potential holders of listed securities, to communicate in a clear and timely manner, and to deal with the FSA in an open and co-operative manner. The Listing Principles would be enforced in the same way as the Listing Rules.
  • A restructuring of the listing sourcebook to make it easier to use, by consolidating rules and guidance, and grouping the contents under the headings of equity, debt and financial products.
  • Deciding whether to retain eligibility requirements for equity issuers that are stricter than those required by European legislation (for example, the need for a 3 year "track record"). Under the forthcoming directives, member states are allowed to impose higher regulatory standards than those required by the directives (so-called "super-equivalent" provisions), but in principle any market which does so runs the risk of losing business to other markets with lower standards.
  • Changes to some of the requirements relating to the listing of debt securities, and to securities of overseas issuers.
  • Possible changes to corporate governance matters. The proposals include giving the FSA the power to disqualify directors of listed companies for serious breaches of the Listing Rules (which would require changes to be made to the underlying legislation), and recommending (but not requiring) all listed companies to produce an Operating and Financial Review (OFR). The government announced in July that it intends to introduce - ahead of the other reforms to the Companies Act proposed in the White Paper published last year - a statutory requirement for 'large' companies to produce an OFR, but no timetable for this change has yet been set. The FSA does not, however, believe that the Listing Rules should require listed companies to report on social, environmental and ethical issues, although it does consider that, as a matter of best practice, listed issuers should comply with the ABI Disclosure Guidelines on Social Responsibility.
  • Retaining the UKLA's super-equivalent continuing obligations, such as the class test regime requiring equity issuers to obtain shareholder approval for major transactions.
  • Introducing a new requirement for issuers to obtain shareholder approval where they intend to de-list shares. The London Stock Exchange has just finished consulting on the proposed introduction of such a requirement for companies wishing to de-list from AIM: the outcome of the consultation is presently awaited.
  • Streamlining the Model Code on Directors' Dealings to bring it into line with the new Market Abuse Directive.
  • Implementing a more flexible approach to the presentation of financial information, so that companies may include both audited and non-audited figures, provided they disclose the source of information.
  • Reviewing the need for listed companies to have a sponsor for new issues/major transactions. The FSA is also looking at the rules relating to conflicts of interest affecting sponsors.

The consultation period runs until 31 January 2004, with a series of feedback meetings on key topics to be held in November and December. The consultation paper is available from the Financial Services website at This link will open a PDF in a new window.