By Marcus Leach

The Financial Services Authority (FSA) has today (Thursday) proposed a number of changes to the Listing Rules that set out the requirements for companies listed in the UK.

The changes are updates to the rules to take account of market developments. The Listing Rules are the responsibility of the United Kingdom Listing Authority (UKLA), operating under the FSA. The Consultation Paper (CP) also sets out some wider issues in relation to the premium listing standard on which comment is sought.

The Listing Rules have been reviewed on a regular basis since their introduction in 2000. The last review in 2008-10 introduced the premium and standard segments in order to provide greater clarity for investors.

Today’s proposals, the majority of which are technical in nature, fall under a number of different headings:

Reverse Takeovers

The proposed changes will ensure that reverse takeovers cannot be used as a ‘back-door’ route to listing for companies that would otherwise be ineligible. There are currently exemptions that remove some acquisitions from the reverse takeover requirements. These proposed changes will narrow these exemptions.

Sponsor Regime

Sponsors play an important role in the regime for premium listed companies by ensuring that such companies understand the regulatory framework and by providing assurance to the UKLA that companies are meeting the requirements. Today’s proposals are intended to clarify UKLA’s expectations of sponsors — for example by adding a rule that that the FSA can require a sponsor to confirm to the FSA that its client is complying with the Listing Rules.

Externally Managed Companies

The UKLA has observed the development of a new corporate structure — which involves the outsourcing of significant management functions to an offshore advisory firm that the UKLA has termed ‘externally managed companies’. This structure places the offshore advisory company beyond many of the key controls within the listing regime and lessens the ability of shareholders to hold the real management of the company to account.

The CP proposes to make the management of the advisory company responsible for any prospectus issued by the listed company and subject to existing rules about dealing in the shares of the listed company. In addition, externally managed companies would not be eligible for a premium listing, but they would still be eligible for a standard listing.

Premium Listings

There has in recent months been debate about some of the requirements for the premium listing standard. There has also been a separate debate about the criteria used to define inclusion in the main stock market index which was recently the subject of consultation by the FTSE.

On the listing rule side, some questions have been raised about the Listing Rule free float requirements, but there is also a broader discussion about whether the premium listing standard more generally needs to be enhanced. The CP invites comment on whether any changes may need to be made to the Listing Rules to provide additional protection to investors.

“It is important that the Listing Rules continue to keep pace with market developments and the needs of investors," David Lawton, the FSA’s acting director of markets, said.

"We believe that this consultation, which proposes specific changes, but also invites debate about the corporate governance standards that should underpin the premium listing standard, will serve that purpose and welcome responses to help us maintain an appropriate regime for the UK.”

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