Official listing
239.Part 6 of FSMA sets out the regime under which the “competent authority” is responsible for: (a) maintaining the official list of securities admitted to trading on a regulated market in the UK (the “Official List”); (b) regulating the admission of securities to the Official List; and (c) monitoring compliance with requirements imposed on issuers of securities (and other relevant persons) by or under the Part or by directly applicable European measures. Currently, the FSA is the “competent authority” and is known in this context as the UK Listing Authority (“UKLA”).
240.Part 6 has been substantially amended as a result of a number of developments in European law. For example, in addition to performing the functions as the competent authority for listing, the UKLA now has responsibility for making the prospectus rules (section 84) and the disclosure and transparency rules (section 89A and 96A) which are derived from Directive 2003/6/EC on insider dealing and market manipulation (market abuse) and Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading.
Section 16: FCA to exercise functions under Part 6 of FSMA
241.At the time FSMA was enacted it was unclear whether the FSA would undertake, on a permanent basis, some or all of the functions as the competent authority under Part 6. Therefore Part 6 was prepared as a self-contained Part and Schedule 7 to FSMA makes modifications to that Act in its application to the FSA as the competent authority under Part 6. Paragraph 2 of Schedule 7 carves out the FSA’s functions under Part 6 from the application of the FSA’s general duties (which are specified in section 2 of FSMA). In addition, Schedule 8 to FSMA (transfer of functions under Part VI) confers on the Treasury a power to confer on another body some or all of the functions under Part 6.
242.Under the new regulatory arrangements, the FCA is to undertake all of the FSA’s functions under Part 6. Therefore section 16(2) to (12) changes the references in that Part from the “competent authority” to the “FCA”. In addition, the power to confer on any other body some or all of the functions under Part 6 of FSMA is removed (subsection (13)(l)), as are other provisions which are no longer needed; for example, bespoke arrangements relating to fees and penalties (subsection (13)(c) and (d)) are omitted as the general provisions in FSMA relating to the FCA will now extend to the functions under Part 6.
243.The FCA’s general duties, including the requirement to act compatibly with its strategic objective (specified in new section 1B) apply when discharging the rule and guidance-making functions under Part 6.
Section 17: Discontinuance or suspension at the request of the issuer: procedure
244.Section 77 of FSMA (as amended by section 16(5)) provides that the FCA may discontinue or suspend the listing of securities where there are special circumstances which preclude normal regular dealings with them. (“Discontinuance” and “suspension” are defined in section 78(13) and (14).) Section 78 describes the procedural arrangements which apply where the FCA, of its own doing, proposes or decides to discontinue or suspend the listing of securities. Section 78A sets out the procedure to be followed where the issuer applies to the FCA for listing to be discontinued or suspended.
245.The requirement imposed by section 78A(2) to issue a written notice where the FCA decides to discontinue or suspend the listing of securities at the request of the issuer is onerous in practice as the FCA may wish to act very quickly in response to the request. Therefore section 17(2) makes some minor and technical changes to section 78A to enable the FCA to give notice in writing or orally where the FCA decides to take the action requested by the issuer. Subsection (2)(c) substitutes section 78A(3) and sets out the information which should be included in a notification.
246.Subsection (3) makes a consequential change to section 395 which sets out provision in relation to the procedural arrangements which must be put in place by the FCA so that an oral notification under section 78A constitutes a “supervisory notice” for the purposes of that section.
Section 18: Listing rules: disciplinary powers in relation to sponsors
247.Section 88(1) enables the FCA to make listing rules requiring issuers to make arrangements with “sponsors” for certain purposes. A “sponsor” is a person who is approved for the purposes of the rules and whose role, in broad terms, is to advise an issuer on the listing and disclosure requirements imposed by or under Part 6.
248.Subsection (2)(a) extends the provision which may be made in listing rules such that the rules may specify that the FCA may grant approval, or make an existing approval, subject to such limitations or other restrictions as may be specified by the FCA. The rules may also specify that the FCA may agree to suspend (rather than cancel) a person’s approval as a sponsor. An approval may be suspended, for example, where a person has not undertaken a certain form of transactional work for some considerable time (and is not considered to have the relevant up-to-date expertise in a particular area) and will last until the sponsor has demonstrated the competencies necessary to undertake this work.
249.If the FCA proposes to impose limitations or other restrictions to which a person’s approval relates (in accordance with rules made under the new section 88(3)(e)), the FCA must issue a warning notice. If the FCA decides not to impose such limitations or restrictions following consideration of any representations received from the person concerned, it must issue a written notice. If the FCA decides to impose such limitations or restrictions, the FCA must issue a decision notice. Subsection (2)(h) inserts a new subsection (8) into section 88 which lists the different forms of application which may be made under “sponsor rules”. For example, where the FCA has imposed a limitation or other restriction in relation to a person’s approval as a sponsor, that person may apply for the withdrawal or variation of such limitation or restriction. Subsection (3) provides that the power for the FCA to impose limitations or other restrictions on the services to which an approval relates is available in relation to persons who were approved as sponsors prior to the coming into force of subsection (2)(a).
250.Section 89 of FSMA (public censure of a sponsor) enables the FSA to make provision in listing rules enabling it to issue a public censure where the sponsor has been found to have contravened a requirement imposed by rules under section 88(3)(c). Subsection (4) substitutes for section 89 new sections 88A, 88B, 88C, 88D, 88E and 88F.
251.New section 88A(1) and (2) extend the types of disciplinary sanction that may be imposed on sponsors and the circumstances in which such action may be taken. New section 88A(4) to (6) make provision in relation to suspensions or restrictions imposed by way of a disciplinary measure and section 88A(7) makes clear that the FCA may not take disciplinary action in relation to a contravention once the limitation period has expired; the limitation period is three years starting on the day that the FCA first knew of the contravention (subsections (8) and (9)). A suspension or restriction imposed under this section is not to have effect for a period of more than 12 months (subsection (3)). This is consistent with the provision made in relation to suspensions or restrictions of a person’s authorisation to conduct regulated activities (section 206A of FSMA (suspending permission to carry on regulated activities etc)).
252.New section 88B specifies the procedure which the FCA must follow before taking action against a sponsor under new section 88A. In the event that the FCA decides to take any of the forms of action specified in new section 88A(2), the person subject to the measure has the right to refer the matter to the Tribunal (subsection (9)). These arrangements are consistent with the procedure to be followed in relation to disciplinary measures imposed on authorised persons (see sections 205 to 208 of FSMA).
253.New section 88C requires the FCA to prepare and issue a statement of its policy with respect to the imposition of penalties, suspensions, or restrictions under new section 88A to which it must have regard in exercising or deciding whether to exercise its powers under new section 88A. A copy of the statement must be given to the Treasury. Subsection (2) specifies the matters to which the FCA must have regard in determining its policy with respect of the action. A statement issued under this section can be altered and replaced (subsection (3)) and the FCA may charge a reasonable fee for providing copies of a statement (subsection (7)).
254.New section 88D sets out the procedures to be followed by the FCA in respect of statements issued under new section 88C. In particular, before a statement is issued it must be published in draft and a response given to any representations made about it.
255.New section 88E confers a new power on the FCA to suspend, for such period as it considers appropriate, a sponsor’s approval, or to impose, for such period as it considers appropriate, such limitations or other restrictions in relation to the performance of services to which the sponsor’s approval relates. The power can be used where the FCA considers it appropriate to do so for the purposes of advancing one or more of its operational objectives.
256.New section 88F sets out the procedure to be followed where the FCA proposes or decides to take action under the power conferred by new section 88E. Under subsection (1)(a) action may take effect immediately or on such later date as may be specified in a written notice. This aligns with the procedure to be followed in relation to variations of an authorised person’s permission to carry on regulated activities.
Section 19: Primary information providers
257.Section 19 inserts new sections 89P, 89Q, 89R, 89S, 89T, 89U and 89V into Part 6 of FSMA.
258.New section 89P enables the FCA to make rules which may require the issuers of financial instruments to use primary information providers for the purposes of disseminating information to the market. A “primary information provider” is defined in subsection (2) as a person approved by the FCA for the purposes of section 89P. Subsection (4) specifies that Part 6 rules made by virtue of subsection (1) may provide for the FCA to maintain a list of providers, impose requirements on a provider in relation to the giving of information or information of a specified description and other matters. Subsections (5) to (9) make similar provision to that made by section 88 (as amended by section 18(2)) in relation to sponsors.
259.New sections 89R to 89V make similar provision in the case of primary information providers to that made by new sections 88A to 88F, which confer on the FCA new supervisory and disciplinary powers in relation to sponsors.
Section 20: Penalties for breach of Part 6 rules
260.Section 91 of FSMA specifies the types of penalties which may be imposed by the FCA in relation to a breach of Part 6 rules. Section 91(6) provides that the FCA may not take action against a person for a breach of Part 6 rules after the end of the period of two years following the date on which the FCA knew of the contravention. Proceedings are treated as having been begun within that period when a warning notice is given under section 92 (procedure). The amendment made by this section extends the period to three years. This is in order to achieve consistency with section 66(4) which deals with penalties imposed on approved persons.
Section 21: Repeal of competition scrutiny power
261.Section 21 repeals section 95 of FSMA. The power conferred by that section is no longer needed as the provisions in Chapter 4 of Part 9A (inserted by section 24) will apply.
