FSA plans would give foreign firms an easy ride at expense of UK investors

26 February

The Consumer Panel has today written to the FSA to say that their proposals to amend the stock exchange listing rules for offshore investment companies threaten to undermine investor protection for the sake of attracting non UK based companies to list in the UK.

The Consumer Panel is concerned that the FSA wishes to introduce measures which it seems will enhance the attractiveness of the London Stock Exchange to private equity vehicles and those wishing to follow alternative investment strategies, at the expense of investor protection.

FSA consultation CP06/21, is proposing to allow overseas investment companies to list under Chapter 14, with lighter obligations than UK based companies listing under Chapter 15. By applying the European minimum directive criteria, a range of consumer protection measures will be lost – many of which were introduced in 2004 after the splits "crisis", and which have been relied on to assure the government and market that another similar crisis should not occur. The proposed change by the FSA could mean the reduction of protection measures such as the spread of investment risk; publishing of investment policy; prohibitions on substantial cross-shareholdings; and the independence of board members and investment manager. These protections have wide industry support and have done a lot to boost investor confidence in the wake of the splits crisis.

John Howard, Chairman of the Financial Services Consumer Panel said:

"We think that, with its current proposal, the FSA is at risk of making a serious mistake that will be damaging for investors and damaging for the confidence of the market. Indeed, a consequence would be that there would be a lighter touch regime for the companies which pose the greatest potential risk for investors – a reversal of the FSA's normal risk-based policy."

Notes to editors

1. The FSA established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status.
   

2. The emphasis of the Panel’s work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA’s remit. More information about the Panel's work is available on this website.
   

3. The Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.
   

4. There are currently thirteen members of the Panel as listed below.

   John Howard (Chairman)
   Adam Phillips (Vice Chairman)
   Kay Blair
   Michael Chapman
   Stephen Crampton
   Caroline Gardner
   Jenny Hamilton

   Tony Hetherington
   Stephen Locke
   Nick Lord
   David Metz
   Lindsey Rogerson
   Carol Stewart