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FSA/PN/135/2006
14 December 2006

The Financial Services Authority (FSA) has today published CP06/21 Investment Entities Listing Review to clarify and seek further views on certain aspects of the original consultation (see note 2). This includes clarifying the importance of a company's investment policy; explaining the FSA's decision to withdraw its proposal to abolish the directive minimum regime for overseas investment companies and; introducing new listing categories to make it clear to investors what obligations a listed company is subject to.

Sally Dewar, FSA Director of Markets, said:

"In seeking to reform the Listing Rules for investment entities, the FSA aims to modernise the UK's regime. This will provide companies with greater flexibility over their investment strategies, while maintaining disclosure-based protections designed to make the regime equally attractive for investors.

"As we said in October the FSA has also decided to retain the directive minimum listing regime for overseas investment companies. In reaching this decision we have taken account of recent market developments and our obligation to have regard to the international character of the UK's markets. We feel, in this light, that it is appropriate to offer international companies a choice of super-equivalent or directive minimum regimes."

Amended Proposals

The March consultation paper proposed replacing the range of old, detailed and prescriptive rules that governed various types of listed investment entities with a single, principles-based regime allowing greater flexibility for investment strategies. Some detailed aspects of the rules needed to be modified in the light of responses but the FSA's general approach and many specific proposals were favourably received by respondents. The key revised proposals include:

• a proposal to remove the prohibition in the Listing Rules on closed-ended funds controlling companies in which they invest, thus allowing these vehicles (for example private equity funds) to pursue a wider range of investment strategies;
• greater clarity on what a primary listed closed-ended fund will have to include in the investment policy it will be required to publish and adhere to; and
• revised proposals on the disclosure of a primary listed investment entity’s risk profile aimed at ensuring investors have sufficient information to evaluate a company's risk profile whilst addressing respondents' concerns that the proposals we set out in CP06/4 were disproportionate.

These changes are aimed at improving the super-equivalent regime for investment entities under Chapter 15 of the Listing Rules.

Directive Minimum Regime & New Listing Categories

The FSA no longer thinks it appropriate to insist that all investment entities are subject to the additional requirements set out in Chapter 15 of the Listing Rules. International companies will now have a choice of directive-minimum or super-equivalent standards.

In light of this change there is a need to make the listing regime clearer, flexible and more comprehensible and as a result the FSA proposes to introduce new categories that more accurately reflect the listing obligations that attach to the different types of listing.

Notes for editors

1. The CP06/21 'Investment Entities Listing review - Further consultation and feedback on Part 2 of CP06/4' has been published today.
2. The initial consultation paper on this subject was published on 30 March 2006 CP06/4: 'Implementation of the Transparency Directive/ Investment Entities Listing Review'.
3. The consultation period for this paper ends on 28 February 2007 and the changes will be implemented in Q3 2007.
4. The term 'investment entities' comprises investment trusts, venture capital trusts and other domestic and overseas investment companies, including property investment companies. Unlike authorised unit trusts and open-ended investment companies, such entities are not authorised products under the FSA's regime for authorised collective investment schemes. Rather, they are companies which, if listed, are subject to the listing regime.
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.
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.