The FSA published CP12/2 in January 2012setting out some of its proposals for changes to the considerable and substantive content of the Listing Rules; Prospectus Rules; and Disclosure Rules and Transparency Rules which it identified as being necessary for change to ensure that the operational effectiveness of the Listing Regime is maintained. The changes sought to ensure that the Rules properly reflect recent changes in contemporary market practices and so would allow the UK Listing Authority (UKLA) to continue to meet its objectives. This consultation paper raised some wider issues concerning the nature of the premium listing standard and undertook, dependant upon responses, consideration to developing specific options or proposals for discussion in a further paper.

1. The FSA CP12/25
Enhancing the effectiveness of the Listing
Regime and feedback on CP 12/2
A CEI Compliance Information Presentation

2. Is it Relevant?
This presentation may be of interest to UK and overseas issuers with
UK-listed securities or considering a UK listing of their securities;
firms advising on the issuance of UK-listed securities; and firms or
persons investing in or dealing in UK-listed securities.
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3. What is the Background?
The FSA published CP12/2 in January 2012setting out some of its
proposals for changes to the considerable and substantive content of
the Listing Rules; Prospectus Rules; and Disclosure Rules and
Transparency Rules which it identified as being necessary for change
to ensure that the operational effectiveness of the Listing Regime is
maintained. The changes sought to ensure that the Rules properly
reflect recent changes in contemporary market practices and so
would allow the UK Listing Authority (UKLA) to continue to meet its
objectives.
This consultation paper raised some wider issues concerning the
nature of the premium listing standard and undertook, dependant
upon responses, consideration to developing specific options or
proposals for discussion in a further paper.
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4. What is the Background?
CP 12/25 entitled ‘Enhancing the effectiveness of the
Listing Regime and feedback on CP 12/2’ covers the
feedback relating to the earlier document and includes
final rules.
The latter part of the paper contains a consultation on
proposed amendments to the Listing Rules to enhance
the effectiveness of the Listing Regime, and provides
draft rules.
In the second part of the paper the regulator is also
consulting on proposed amendments to the Listing Rules
relating to the implementation of the Alternative
Investment Fund Managers Directive (AIFMD), again with
draft rules.
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5. What is the Background?
The FSA published CP12/2 in January 2012setting out some of its
proposals for changes to the considerable and substantive content of
the Listing Rules; Prospectus Rules; and Disclosure Rules and
Transparency Rules which it identified as being necessary for change
to ensure that the operational effectiveness of the Listing Regime is
maintained. The changes sought to ensure that the Rules properly
reflect recent changes in contemporary market practices and so
would allow the UK Listing Authority (UKLA) to continue to meet its
objectives.
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6. So What Does It Say?
45 respondents to the first CP represented a good cross-section of its
stakeholders generally, and overall appeared very supportive of the
proposals. Although there were some relatively minor amendments,
the FSA is, to a large extent, proceeding as proposed.
On 1 October 2012 the rules detailed within CP 12/2 from January
2012 became effective, with the exception of the new rules for
Sponsors, which will take effect on 31 December 2012.
Be aware that because some of the new rules relating to “Reverse
Takeovers and Financial Information” make new rules imposing
obligations to appoint sponsors, the FSA has made transitional rules
to suspend the operation of these rules (or the parts affected) until
31 December 2012.
The specific rules affected in this way are:
LR 5.6.6R; LR 5.6.13R; LR 5.6.17R; LR 5.6.26R; and LR 13.5.27BR.
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7. New Rule?
The regulator is also making a new rule LR 9.2.20R
relating to “Externally Managed Companies” transitional
in order to mitigate costs of restructuring, for the
premium listed issuers who currently use an external
management structure.
This new rule will not come into force until 1 January
2014, which is designed to provide issuers affected by
this rule the opportunity to give notice on their existing
external management contracts and put new
arrangements in place.
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8. Enhancing the effectiveness
The FSA explained in CP 12/2 that its overall and continuing purpose
in regularly reviewing the Listing Rules was to ensure that they
reflect properly changes in market practice and so allow the UKLA to
meet its objectives of:
• providing an appropriate degree of protection for investors
in listed securities;
• facilitating access to listed markets for a broad range of
enterprises; and
• seeking to maintain the integrity and competitiveness of UK
markets for listed securities.
In alignment with that statement, they now set out proposals for
consultation on a range of technical issues; it also presents the
feedback and sets out its final policy positions in the Feedback
section of CP 12/25.
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9. Enhancing the effectiveness
Regarding the proposals relating to externally managed structures,
the regulator has taken the broader view that their management
arrangements and provisions for accountability to shareholders were
not consistent with the high standards that the FSA attaches to the
premium listing benchmark.
CP12/2 initiated a high-level discussion of the wider issues
surrounding the quality of the premium listing regime, the free float,
minority shareholder protection (especially in situations where there
is a controlling shareholder) and governance.
The regulator states that its analysis of the various issues raised
during consultation suggests that the underlying concerns of market
participants do not represent systemic failure of the Listing Regime.
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10. Enhancing the effectiveness
Despite this, the FSA recognised that the concerns may
represent the beginning of a longer-term pattern of
issues that could continue to grow in severity if no action
were taken and risk undermining the integrity of the
Listing Regime. They therefore concluded that the
concerns mostly relate to misaligned behaviour in some
areas, so they conclude that there is no single remedy. Its
proposals should therefore be seen both as individual
measures which are designed to correct specific points of
misaligned behaviour but which it also intends to be
taken together as a restatement of what the regulator
sees as the high standards of governance required of
Premium listed issuers.
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11. The Proposals
The proposals represent a significant enhancing of the Listing
Rules in the area of governance but at the same time
recognise the potential for the standard listing segment to
accommodate issuers that are not yet able to comply with the
strict requirements applicable within the premium segment:
Optimising the entry criteria to the Premium segment so as
to maintain the strength of the Premium Listing brand:
○ implementing the concept of a controlling
shareholder and requiring that an agreement is put in place to
regulate the relationship between such a shareholder and the
listed company;
○ insisting on a majority of independent directors on
the board where a controlling shareholder exists; and
○ prohibiting certain voting arrangements which lower
investor protection within the premium segment.
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12. The Proposals
Ensuring that the eligibility requirements continue to apply
as meaningful ongoing obligations:
○ requiring a premium listed issuer to notify the FSA
when it is not in compliance with its ongoing obligations;
○ introducing a new dual voting requirement for the
election of independent directors;
○ providing guidance on what constitutes an
independent business that is eligible for premium listing;
○ clarifying the requirement for an applicant to control
the majority of its business and providing guidance regarding
areas where such control may not exist;
○ mandating the content of a relationship agreement
and requiring that it is adhered to on an ongoing basis; and
○ empowering independent shareholders to approve
material changes to the relationship agreement.
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13. The Proposals
Clarifying the operation of the free-float provisions:
○ explicitly excluding shares subject to a lock up
for a prolonged period, since they do not provide any
liquidity;
○ detailing the circumstances where the regulator
might consider modifying the 25% free-float
requirement, indicating that any modification beneath
20% would be unlikely; and
○ removing the requirement for a minimum
absolute percentage free float within the standard
segment, provided that sufficient liquidity is present.
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14. The Proposals
Providing shareholders with better quality information:
○ requiring fuller and more comparable disclosures for
smaller related party transactions in the annual report;
○ mandating disclosure in an annual report made as a
result of the issuer’s premium listing to be clearly identifiable
as such;
○ introducing statements regarding the operation of
the relationship agreement on an annual basis; and
○ clearly expressing the applicable standard when
assessing compliance with the UK Governance Code with
respect to directors’ knowledge of their responsibilities and
obligations, including fiduciary duties (or local equivalent).
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15. The Proposals
In addition to the above, the regulator has taken the
opportunity to review the Listing Principles as well as the
scope of their application. Currently, the Listing Principles only
apply to companies that have a premium listing of equity
shares with the result that certain expectations that the FSA
would expect to apply across all listed companies have been
perceived as pertaining only to premium listed issuers.
The FSA is proposing that two of the existing six Listing
Principles should be applicable to all listed companies. It has
also proposed some amendments that it believes are
appropriate and added some new principles to the Premium
Listing Principles to ensure that they better reflect the high
standards applicable within the premium segment.
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16. Implementation of the Alternative
Investment Fund Managers Directive
Some respondents did acknowledge the potential for conflict,
but overall the regulator’s original policy proposal was not
supported. The respondent’s general view was that it would be
better to be less prescriptive and it is considered in those
responses that there is good evidence for market-based
solutions.
The FSA’s revised proposal introduces a rule requiring boards
of listed issuers to effectively monitor and manage the
performance of their key service providers, which includes
investment managers. The regulator will expect boards to
ensure appropriate contracts are in place upon listing and to
ensure they are in a position to take action if the contractual
obligations are breached or the contractual arrangements are
no longer in the best interest of shareholders.
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17. Implementation of the Alternative
Investment Fund Managers Directive
The regulator states that this rule clearly articulates its
current (and continuing) expectations of the boards of
listed investment entities, but allows each issuer to find
an individual solution for dealing with any conflicts
arising.
The FSA is seeking feedback on all aspects of its paper.
Comments in relation to the consultative sections of the
paper must be submitted by 2 January 2013.
The FSA intends to publish its feedback in the spring of
2013.
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18. What Is This Presentation
This is a regulatory summary service
provided by CEI Compliance Limited, The
UK’s Fastest Growing Alternative
Regulatory Consultancy
We can only advise on the salient points in
this summary and if you want further
details then we would suggest you access
the full document from the FSA Website at
http://www.fsa.gov.uk
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19. So Who Are CEI
Compliance? The Fastest Growing
Alternative UK
Regulatory
CEI Compliance have been providing Consultancy
risk and compliance services to all
sizes of regulated firms from start-up
banks and FTSE100 companies to IFAs
and small Wealth Managers. Provide a Discrete
Service for Remedial
and Proactive Risk &
Compliance
The key to our success is that those
who need to know refer us to others.
We are a well kept secret who places
confidentiality and honesty as two of
Have an Ultimate
their highest values. Goal of Improving
Our Client’s Position
Big enough to be
credible,
Small enough to
care Call 0800 689 9 689

20. Areas of Working
Because of our reputation of Areas of Work
discretion and confidentiality we Remedial with NDA
operate under Non-Disclosure
Agreements for roughly 2/3rds of
our work Governance with no
NDA
External to this the breakdown of
our work is roughly split with 50% 62%
Risk & Compliance and 50%
Governance. 21%
8% 9%
CEI Also trade under Compliance
Consultant
(www.complianceconsultant.org) and
S166 Reports (www.S166reports.co.uk) Source: CEI Stats June 2012
as separate businesses.
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21. Isn’t Bigger, Better?
Generally, No.
It’s usually just more expensive
Fortunately, there are more positive alternatives to
using a niche consultancy compared to the
Accentures, McKinseys or the big accountancy firms like
Deloitte, E&Y etc.
We not only consider that size doesn’t matter, but large
size can actually be a disadvantage in meeting your
needs.
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22. Dealing with a niche
consultancy
You are always dealing with the principal when you are
dealing with my firm. This means that I, the MD, are the
relationship manager and there is no junior partner to whom
responsibility will be transferred. There is no decreased
accountability, no "hand-off" to a less-informed colleague. If
your interests are at stake continually, shouldn’t you
reasonably expect my continual involvement?
We can usually provide resources on a "just in time"
basis. That is, our projects do not have to cover excessive
overhead, such as multiple offices, large administrative
backup, recruiting, partner perks, etc. We are organised to
efficiently provide everything that you, as the buyer needs, but
nothing more than that which means that you are paying for
value and results and only minimum overhead.
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23. Dealing with a niche
consultancy
There is more likelihood of your privacy and
confidentiality being observed with fewer people
working on the project. We (and/or the few people we
might also involve) are constant which means that there
isn’t the need to sift through dozens of differing
perceptions.
We’re faster. We can respond to requests quickly, and
return all calls within four hours which means to you
that there is no need to worry about a bureaucracy,
delays and unknown people on the other end of the
phone.
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24. Dealing with a niche
consultancy
Since we handle fewer concurrent projects than larger
firms, our attention is focused on the job at hand. This means
that you don’t have to "compete" with another dozen or so of
our clients, which may be larger, paying more or are more
time-demanding. We structure our work so that every
client receives maximum attention.
Your investment is controlled. There is no "meter
running". We work for a fixed, value-based, project fee.
Large firms can’t afford to do that as readily because of all the
people involved and their own insistence on measuring their
success by billable hours. We measure our success by client
objectives reached, not in “time units”.
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25. Dealing with a niche
consultancy
The expertise that larger firms use is often white-labelling
for them by a pool of consultants available in the
marketplace at any one time. We select our consultants
from practising subject matter experts which
means that you obtain the same or better expertise for
less money, because;
Inevitably, we are less expensive. There are
economies to using someone who can base their fees on
each situation and not on a pre-determined service scale
or need for reaching a practice quota. This means quite
simply better value to you.
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26. And, additionally
The benefits of dealing with the “Compliance
Doctor” and CEI Compliance is;
A firm with experienced and qualified
consultants;
A firm that can apply changes and needs in a
common sense way that is practical and
effective;
A firm that is considered and respected as
independent and reliable by the FSA;
A firm that provides you with unfettered access
to the principle immediately and on demand;
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27. What Makes Us Different?
Phase 1 We will conduct an initial appraisal at our cost
– only charging for expenses
Phase 2 We will make a proposal based on our
appraisal with your outcomes and needs
Phase 3 We will discuss the precise scope with you
and provide you with a project price
We will complete the work to your original
Phase 4 scope and satisfaction
Each proposal deserves
to be as unique as a
fingerprint

28. Who Are Our Clients?
text.
We have a wealth of Financial Services Experience, and
due to the remedial and sensitive nature of our work
forming over 60% of our business and that is conducted
under a Non Disclosure Regime, we cannot demonstrate
every client.

29. Who Are Our Clients?
We also have a large
amount of experience in a
number of other fields and
industries within the major
utilities and even Local
Authorities.

30. Questions? More Information?
CEI Compliance Limited
www.cei-compliance-limited.co.uk
Call
0800 689 9 689
Email
info@ceicompliance.co.uk