The FSA has published a consultation paper proposing amendments to Chapter 18 of the Listing Rules. The proposal aims to prevent investment entities from circumventing the new prohibition on investment entities obtaining a secondary listing of equity securities under LR 14 (see investment funds e-bulletin dated 13 December 2007) by listing depositary receipts over an investment fund's shares under LR 18 instead.

The consultation paper notes that although this route has not been used by investment funds, they are not currently precluded from using it and that some may be considering the possibility of using this route once access to Chapter 14 has been withdrawn in March. The requirements of Chapter 18 are close in both substance and form to the directive minimum regime set out in Chapter 14.

The FSA is of the view that, because depositary receipts offer investors equity exposure, allowing investment funds continued access to Chapter 18 could be seen as a potential loophole. Investment funds could gain the accreditation of 'official listing' for their securities despite being subject only to directive minimum obligations.

The FSA plans to implement the proposals in April 2008. The consultation paper (CP 08/01) is available on the FSA website at  http://www.fsa.gov.uk/pubs/cp/cp08_01.pdf.