City Regulation

Proposed Changes to the Listing Rules at N2,
FSA comes into its own

At midnight on 30 November the Financial Services Authority finally became the UK's single financial services regulator under the Financial Services and Markets Act 2000. It took over the powers and responsibilities of its 10 predecessor bodies.

Welcoming the arrival of 'N2', FSA chairman Howard Davies said that the regulator's aim was 'to maintain a proportionate approach, while ensuring that London maintains a reputation for being a well-regulated financial centre, in which market participants have confidence in the rules themselves, and believe that they will be obeyed by their counterparties'.

ICAEW handbook approved

The Financial Services Authority has given its approval to the ICAEW's handbook for firms it has authorised in its role as a designated professional body (DPB) under the Financial Services and Markets Act 2000.

The handbook is divided into three sections, dealing with: terms and conditions for obtaining a DPB licence; the scope of work that can be carried out under a DPB licence; and how designated work should be undertaken.

Copies were sent out to authorised firms in the run-up to N2. Otherwise, the text can be downloaded from the Institute's website at

Dealing with market abuse

The Financial Services Authority has signed agreements with the UK investment exchanges covering how market abuse will be tackled.

Under the agreements, the exchange itself would handle straightforward cases, where the market misconduct is limited to an individual exchange,the alleged perpetrators are all members of that exchange and its enforcement powers are sufficient to deal with the misconduct. More complex cases would involve the FSA.

The FSA has agreed operating arrangements with the London Stock Exchange, Virt-X, Coredeal, LIFFE, the International Petroleum Exchange, the London Metal Exchange and OM London Exchange.

The FSA's dedicated market abuse helpline number is 020 7676 4900.

Changes to the Listing Rules

The Financial Services Authority's UK Listing Authority has published a policy statement, that summarises the responses to the consultation papers CP100 and CP100a, and sets out the new rules applicable from 1 December 2001.

Most of the changes result from the introduction of the FSMA. The Guidance Manual, as set out in CP100a, will be introduced with minor amendments, particularly in the Guidance on Price Sensitive Information (PSI Guide).

The Quotations Committee has been replaced by the Listing Authority Review for non-disciplinary cases.

The FSA has not proceeded with the proposal-to require a company to make an announcement to the market if a director or relevant employee has breached the company's code of dealing. The proposed disclosure regime, the Model Code's continuing role and its interaction with the will form part of a wider review of the Rules.

The FSA has made it explicit that the PSI Guide is now guidance within the terms of the Act.

Hard copies of the Policy Statement, at £40 each, are available from 0845 608 2372; please quote reference PS100. It can also be downloaded from

Investing in securitised derivatives

In consultation paper 114, , the Financial Services Authority sets out proposals for retail investors to invest directly in securitised derivatives.

Securitised derivatives are products such as covered warrants and certificates that are freely traded and listed on stock exchanges. They allow investors the exposure to a wide range of underlying products such as shares, indices, commodities and interest rates, without direct investment in the underlying product. The investor's return depends on the performance of the underlying instrument, which could include shares, indices such as the FTSE 100 Share Index, foreign exchange, commodities and interest rates.

A retail investor can only purchase a securities derivative once his or her suitability has been established. All investors will receive a risk warning. IFAs and brokers selling these products must be qualified to advise on derivatives.

The listing particulars of securitised derivatives will also include a risk warning on the front page with full disclosure of the risks involved. Any firm wanting to issue securitised derivatives must be regulated by the FSA and permitted to conduct business in derivatives.

The consultation paper can be seen on

Information about pension products

Consumers can now access information about personal pension and stakeholder pension products from the Financial Services Authority's website.

The latest addition to the FSA's comparative tables contains comparative information on more than 80 such pensions.This includes: the effect of charges and deductions; the expense of stopping payments after only three years; whether payments are invested in a unitlinked or with-profits fund; the number of free switches allowed between funds; and whether charges are raised if payments are increased, decreased or missed.

The FSA is planning further tables - on investment bonds, and mortgage and savings endowments.

The comparative tables can be accessed at

One of the FSA's long-term aims is to improve public understanding of financial products and services. A new CD-Rom, FSA Financial Planning, is designed to help consumers establish their goals and priorities. It is available free from the FSA consumer helpline on 0845 606 1234. Free FSA fact sheets and booklets on personal finance topics are also available from this helpline, while generic information is available on consumer help at

In addition, the FSA is working with the Department for Education and Skills to get personal finance on the school curriculum.

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