In March 2006, the Financial Services Authority (FSA) issued Consultation Paper 06/04 (CP 06/04), Part 2 of which contained the FSA’s consultation on proposed changes to its listing rules (Listing Rules) relating to investment entities1. In December 2006, the FSA published Consultation Paper 06/21 (CP 06/21) containing further consultation and feedback on Part 2 of CP 06/042.

The FSA’s review of the Listing Rules relating to investment entities has been prompted by the wider variety of investment entities, using increasingly sophisticated methods of investment, now seeking admission to listing on the FSA’s official list (Official List). The FSA will also have had regard to the number of sizeable investment entities that, unable to meet the FSA’s prescriptive listing requirements, have recently turned to AIM or Euronext for their liquidity needs.

The proposed changes to the Listing Rules are intended to enable a wider range of investment entities to list in the United Kingdom (UK) for the first time, by replacing certain of the current prescriptive Listing Rules with a broader principles-based approach. Investor protection is to be maintained through revised and enhanced disclosure requirements.

If implemented as currently proposed, the review will constitute the most radical overhaul for some years of the Listing Rules relating to investment entities, as it will introduce new categories of investment entity with different disclosure and compliance standards. Many of the proposed changes are overdue and will be welcomed by the market. Others, made possible by the implementation of the Prospectus Directive in July 20053, are more controversial and are expected to be the subject of lively debate over the coming weeks and months.