New edition of City Takeover Code

The Panel on Takeovers and Mergers has issued the seventh edition of which incorporates amendments that the Code Committee has already published. The changes applied with effect from 1 May 2002.

Following the implementation of N2 on 1 December 2001, a number of changes have been made to the introduction to the Code and in other sections. Because of the Financial Services Authority's approach towards regulatory announcements, the Code now has a new definition of regulatory information service.

References in the Code to the Stock Exchange have been changed to reflect the different roles of the UK Listing Authority and the Exchange. Also, some of the references to AIM and Ofex have been made clearer.

Further copies of the Code can be obtained, at £50 each, from the secretary, Panel on Takeovers and Mergers, P O Box No 226, The Stock Exchange Building, London EC2P 2JX (telephone 020 7382 9026). There is an annual charge of £25 for the amendments service.

Regulation of with-profits funds - list of actions

The Financial Services Authority has published its , which gives a list of actions to be taken to improve the governance and transparency of with-profits funds.

For a long while, with-profits funds enabled savers to enjoy a smoothed return from investment in equities and other securities, but recently these funds have been criticised for their lack of transparency.

The FSA seeks to improve consumer understanding of with-profits funds and establish greater confidence that they will be treated fairly. Before sale, there should be clearer information about the risks and nature of this investment. Companies should publish clearer information about their financial state and about their with-profits funds. Moreover, there should be a more open process for deciding how an inherited estate should be allocated.

Under the proposals, insurance companies will publish the principles and practices of financial management that are applied to their with-profits funds, and report annually on compliance. The FSA sees the need for more directly comparable presentation of information on the solvency of with-profits funds. It envisages enhanced disclosure requirements and improvement in information to consumers after the product has been sold.

The FSA has also issued

The Authority plans to consult fully on implementing the proposed changes, and will issue a number of consultation papers.

Copies of both documents can be found at www.fsa.gov.uk.

Problems with split capital investment trusts

A feedback paper from the Financial Services Authority on split capital investment trusts has found that the problems were confined to a minority of trusts. The values of many shares in these trusts have fallen in the last two years because of the decline in the underlying stock markets, rather than through inappropriate investing or financing arrangements.

Typically, split-level investment trusts will have different layers of capital so that investors can decided whether they wish to concentrate on capital return, income or a stated return over a number of years. Problems have arisen at a number of split trusts because of high borrowings and cross-investment.

The FSA will begin formal investigations into alleged collusive behaviour, promotions that may have misled, and possible mis-selling to private investors.

The feedback paper can be viewed at www.fsa.gov.uk.

Capital adequacy standards

The Financial Services Authority's consultation paper 136 outlines a new capital adequacy framework for authorised firms; it places greater emphasis on the firms' assessing the adequacy of their own resources.

The approach should align the amount of capital more closely to the specific risks a firm faces, and build on the FSA's minimum capital requirements.

The FSA plans to implement the new requirements in 2004 for insurance firms, and at a later date for other firms, depending on progress made in agreeing new international standards within the Basel Capital Accord and related European Union capital adequacy legislation.

The consultation paper can be downloaded from www.fsa.gov.uk.

Disclosure of regulatory status

The Financial Services Authority is trying to establish a common way for all authorised firms to disclose to customers their regulatory status at initial meetings and in their letterheads. Its proposals are contained in consultation paper 138, .

Before carrying on a regulated activity with a customer, firms must give a written restatement of their status under the FSMA, with information about complaints procedures and compensation arrangements.

For UK domestic firms and other firms that are directly authorised, the wording will be 'authorised and regulated by the Financial Services Authority'.

The FSA is consulting on how firms can use the FSA logo on their letterheads. Temporary guidance on this subject is available at www.fsa.gov.uk/handbook/guidance/ guidance3.pdf.

The consultation paper can be studied at www.fsa.gov.uk/pubs/cp/138.

Help for whistleblowers

The Financial Services Authority has launched a dedicated telephone line and email address for whistleblowers working in the financial services industry who have concerns about possible wrong-doing in their workplace and have been unable to raise them internally.

The FSA stresses that employees with concerns should first raise them with their employers. The information sheet from the FSA gives details on how to contact the regulator. It can be seen at www.fsa.gov.uk/whistle/ and can be adopted as part of a firm's internal procedures.

The whistleblowing line (020 7676 9200) is manned during office hours, with a restricted access voice mail in operation at other times. The email address is

whistle@fsa.gov.uk. Letters can be sent to: Authorisation Enquiries Department (ref PIDA), FSA, 25 North Colonnade, Canary Wharf, London E14 5HS. The FSA is mainly interested in live concerns or matters of recent history.

The Public Interest Disclosure Act came into force on 2 July 1999; its provisions create a framework for whistleblowers in the private and public sectors.