Financial Services Bulletin - Regulatory Developments

Profession:Farrer & Co

Key Points At A Glance

Major matters reported in this edition include:


The FSA has issued its second United Kingdom Listing Authority (UKLA) Publications Update. From 15 April 2002 changes have been made both to allow listed companies a choice of regulatory information services, and with regard to the rules requiring the business of an applicant to be supported by historical revenue-earning records.

The Registry of Friendly Societies has issued its last report. The responsibilities of the Registry were transferred to the FSA with effect from N2.

Howard Davies has warned against the over-regulation of the European securities market. Mr Davies has highlighted particularly the need for regulators to take into account Europe's role in the larger global financial system and the need to protect foreign owned wholesale business.

The FSA has issued a consultative paper on the implementation of the European E-Commerce Directive. There will be a number of consequential changes to the Handbook.

The FSA has confirmed to Railtrack that no action is to be taken arising from potential breaches of the Listing Rules relating to the disclosure of price sensitive information.

A further Issues Paper has been released as part of the FSA's review of the with-profits sector.

The FSA has issued a Policy Statement which approves five services to act as Regulatory Information Services from 2 April 2002.

The FSA has expanded the on-line ISA table to include the whole of the UK All Companies sector and five new fund sectors.

The Markets and Exchanges Division has issued its latest newsletter on Market Conduct Issues, Market Watch. Issues addressed include the treatment of block trades, programme trading and guidance requests on research surveys.

The FSA has called on life insurance companies offering with-profits policies to be more explicit on investment strategies, the setting of bonus rates and the application of early surrender penalties.

The FSA has published its first "Financial Risk Outlook" which examines the changing economic, financial, social and legal background in which the FSA operates.

The FSA has issued a number of "frequently asked questions" as annexes to the Market Abuse Code and the Price Stabilising Rules.

The FSA has issued an FSA Guide to the euro which explains the nature and value of the new single currency for the euro area.

The FSA has issued a consultation paper on polarisation, setting out the results of the review that had been conducted into the operation of the polarisation regime and more general related developments to the regulation of direct offer financial promotions.


BIS has published the final results of the 2002 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity which confirms a substantial decline in turnover in the foreign exchange market and a slowdown in the growth of derivatives activity.

BIS has issued a working paper on the hedging of price risk using derivative contracts market to market.

BIS has issued an updated paper on: "The relationship between banking supervisors and banks' external auditors".


The Committee of European Securities Regulators (CESR) and the European System of Central Banks (ESCB) have launched a joint group on securities settlement and clearing.

The European Parliament has approved the proposal for the Regulation on the application of International Accounting Standards to all listed companies within Europe.

The European Parliament has produced a report on the proposed Directive on insider dealing and market abuse.

Regulatory Developments


UK Listing

The FSA has issued its second UKLA Publications update (No 2, April 2002). The FSA is to issue the second edition of the UKLA Sourcebook which includes both the revised UK Listing Rules and UKLA Guidance Manual. Consultation Paper 92, Mechanism for Disseminating Regulatory Information, was issued in May 2001. This reviewed the mechanisms available for the dissemination of regulatory information within the United Kingdom. A Policy Statement, Proposed changes to the UK mechanism for disseminating regulatory information by listed companies, was issued in November 2001. This summarised the proposals to allow listed companies a choice of regulatory information services with the approved services to be listed in Schedule 12 of the Listing Rules. Policy Statement, Proposed changes to the Listing Rules - Feedback on CP 105 and made text, proposed amendments to the application criteria in paragraph 3.6(a) of the Listing Rules which require that the business of an applicant be supported by its historical revenue earning record, with documents to be submitted also being made available through the Document Viewing Facility. CP 105 had been issued in August 2001. Both of these sets of changes came into effect on 15 April 2002. An Electronic Submission System (ELS System) was also introduced on 18 February 2002. This allows company advisers to send Draft Listing Particulars and other draft documentation to the UKLA in electronic form. This operates through a secure web-based platform accessible by sponsors and authorised advisers provided with appropriate log-in details and passwords.

Registry of Friendly Societies, Report

The Registry of Friendly Societies has issued its Report of the Chief Registrar 2000-2001 (March 2002). This sets out the work of the Registry during the period from 1 October 2000 to 30 November 2001 under a number of statutes including the Industrial and Provident Societies Act 1965, the Credit Unions Act 1979, the Building Societies Act 1986 and the Friendly Societies Acts 1974 and 1992. Following transfer of the responsibilities and powers of the Central Office of the Registry and those of the Assistant Registrar in Scotland to the FSA under the Financial Services and Markets Act (with policy issues being transferred to the Treasury) this is the last of these reports. A Service Level Agreement had already been negotiated with the FSA for the transfer or secondment of staff from 1 February 2001 to 30 November 2001 (N2). The Report contains further information with regard to the role of the registry, overview of operations and more detailed information with regard to industrial and provident societies, credit unions and building societies and friendly societies.

EU Securities Regulation

Howard Davies, Chairman of the FSA, has warned against the over-regulation of the European securities markets. The advantages of an open competitive capital market were accepted with lower costs for firms and better investment opportunities and risk diversification for savers. The potential benefits were recently quantified in the Gyllenhamar Report. This objective did not, however, necessarily imply that further regulation had also to be imposed. Howard Davies stressed that a number of factors had to be taken into account in constructing a pan-European regulatory environment. These included Europe's role in the larger global financial system and the need to protect foreign-owned wholesale business, continuing significant differences in retail market practice and preferences and the need to create fully pan-European financial institutions capable of servicing more than one market. A number of the principles of financial regulation set out in the Final Report of the Committee of Wise Men under Alexandre Lamfalussy also included the need to ensure that consumer protection is proportionate to risk, the need to promote...

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