City Regulation

Plan and Budget 2002/03,
FSA's revised budget for 2001/02

The Financial Services Authority has published a revised budget for 2001/02, and consultation about its future fee-raising arrangements.

CP 111, The FSA's Post-N2 Fee Raising Arrangements Including Feedback on CP25, gives a revised budget of £166.9m for mainstream regulatory activities for the whole of 2001/02, including the additional work from N2 ( 1 December) until 31 March 2002 for its wider and deeper statutory responsibilities. This compares with a figure of £164m published earlier this year, which excluded the cost of additional post-N2 work. The extra cost is within the range the FSA predicted.

Some sectors, especially insurers, will see an increase in fees, while others, such as large banks, will benefit from a considerable reduction. To cushion the most significant changes, the FSA proposes to phase them in over three years. The post-N2 fee structures have been designed so that most small firms will pay the same fees as before, or lower.

Early in 2002 the FSA will issue its which will set out priorities and budgeted costs for its first full year as the single regulator.

The consultation paper can be downloaded from

More information for policyholders

Under new rules from the Financial Services Authority, policyholders will be given more information when their contract is transferred from one insurance company to another following a restructuring, takeover or merger.

CP 110, Insurance Business and Friendly Society Transfers, says that from 1 December, procedures for non-life companies will be brought into line with those for life companies, so transfers will require court approval. Policyholders' consent is not required for a transfer, although it may affect their policies.

Also after 1 December, the expert appointed to provide an opinion to the court on any transfer scheme will need to be FSA-approved. The expert's opinion will be made available to the policyholders involved in the transfer. The FSA has the right to be heard by the court and intends to use this power to ensure that its views are taken into account.

Copies of the consultation paper can be viewed on

Market abuse

The Financial Services Authority has announced a package of measures to tackle market abuse when the new regulatory regime comes into force on 1 December. The aim is not to trap the accidental offender but to outlaw insider trading and other abusive practices.

The measures include: a fact-sheet setting out the features of the new market abuse regime; the launch of a regular newsletter to develop a dialogue with the securities industry; and the introduction of new pages on the FSA website, putting all market abuse material in one place.

The fact-sheet, newsletter and Code of Market Conduct are available on The market conduct pages can be read on

Amendments to the Takeover Code

The Takeover Panel's Code Committee, which was established earlier this year, is proposing that companies involved in a potential bid should have to inform the market every six weeks on the progress being made.

This is one of a number of proposed changes to the Takeover Code and the Rules Governing Substantial Acquisitions of Shares that the Committee has issued for public consultation.

Among the other proposals are: public disclosure of any break fees payable if talks collapse; alterations to take account of the FSA's proposals on the dissemination of regulatory information; and proposals to enable shareholders to accept an offer electronically without completing an acceptance form.

Copies of the consultation papers involved (PCP 1 to PCP 5) can be obtained from or by phoning the Panel on 020 7382 9026.

Amendment of resilience test for life companies

The Financial Services Authority has announced a temporary amendment to the resilience test for life insurance companies so that they are not encouraged to switch out of equities and into fixed-interest securities at a level that could be detrimental to policyholders in the longer term.

The regulator has written to all appointed actuaries of life insurance companies, explaining the change. Next year, the FSA will consult on more permanent changes to the resilience test regime.

Life companies must themselves decide on the proportion of equities to hold in their portfolios within the guidance of the prudential framework.

Attacks on the US

Following the terrorist attacks of 11 September, the Financial Services Authority has reminded regulated firms to check their records for names of alleged subjects under investigation by the FBI. The FBI list can be viewed either on or on

The regulator has also said that firms should be aware of their general legal obligations to report suspicious transactions.

The Bank of England has written to banks in the UK pointing out the long-standing financial sanctions imposed by the United Nations on the Taliban, Osama Bin Laden or anyone acting on their behalf.

Investigations into financial dealings in London prior to 11 September, to see whether any terrorist organisation was seeking to profit from the planned attacks, have so far failed to reveal any suspicious transactions, but the FSA is continuing its enquiries.

FSA chairman Sir Howard Davies has commented that the regulator normally sees short selling in the financial markets as a natural and important feature, which provides liquidity. The FSA sees no case for a general prohibition of this activity, although it will act if it discovers examples of abusive practice.

Listed companies

In the wake of the attacks on the US, the UK Listing Authority has reminded all listed companies of their obligations to keep shareholders informed about material developments in their business without delay. Many listed companies have already issued trading statements explaining how the events in the US have influenced trading.

The letter from the UKLA - now part of the Financial Services Authority - says that where a company is faced by an unexpected and significant event such as this, a short delay is acceptable if it is necessary to clarify the situation. A holding announcement should be used where a company and its advisers believe that the impact will be significant but they are not yet able to determine the matter fully.

Paras 9.1 and 9.2 of the require listed companies to notify the Companies Announcements Office without delay of any major new developments affecting their activities.

Further guidance is available from the UKLA help desk on 020 7943 0333, option 4.

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