• Final rules are expected to be published later this year, with implementation of the changes resulting from the review expected in Q3 2007.
  • Investment entities will be divided into three categories, having different disclosure “standards” and different Listing Rules will be required for each disclosure standard. The standards are the “Closed-ended fund standard,” the “Open-ended fund standard” and the “European core standard.” The Closed-ended fund standard equates to a listing under Chapter 15 of the current Listing Rules, the European core standard equates to a listing under Chapter 14 of the current Listing Rules and the Open-ended fund standard is a new standard that reflects the fact that entities eligible to list under this standard are already heavily regulated.
  • Entities listed under the Closed-ended fund standard (Chapter 15 of the Listing Rules) will be known as Closed-ended Investment Funds.
  • Switching between categories will be permitted provided the applicant meets the requirements for the category into which it proposes to switch and provided, in certain cases, that shareholder approval is obtained.
  • The restriction on Closed-ended Investment Funds controlling, seeking to control or being actively involved in the management of investee companies is to be removed.
  • There will no longer be any formal limit on the percentage of a Closed-ended Investment Fund’s assets that may be represented by a single investment (ie, the “20 per cent rule” is to be removed). Instead, a Closed-ended Investment Fund will simply be required to demonstrate that it has the objective of investing and managing its assets with a view to spreading investment risk.
  • To the extent that a Closed-ended Investment Fund publishes a detailed investment policy to comply with the new requirements and the maximum exposures contained in that investment policy simply articulate existing practices and controls (including regulatory controls), the FSA will not deem that to be a change to the investment policy requiring shareholder approval.
  • Having listened to feedback and further considered the issue, the FSA now proposes that the existing periodic disclosure requirements should be retained in modified form and has withdrawn the proposal to require immediate notification of significant changes to risk profile. The latter decision is based on the view that an obligation to make immediate notification of non-price sensitive information would have a disproportionate impact.
  • The Board of a Closed-ended Investment Fund will continue to have to demonstrate that it can act independently of the fund’s investment manager. This requirement is to be extended to Venture Capital Trusts (VCTs). Existing listed VCTs will have three years to comply with the Board independence rules (extended from the eighteen-month period proposed in CP 06/04). New VCTs seeking a listing for the first time will have to comply with the Board independence rules from the outset.
  • Closed-ended Investment Funds will still be required to exhibit control over any feeder fund or intermediate holding company, but prescriptive requirements as to how this is achieved will be removed.