The UKLA has published a new edition of List! (no.17) which covers a range of issues relating to practical aspects of the changes made to Chapter 15 of the Listing Rules in September.
List! highlights the main differences between the old and new regimes for investment entities and also includes, among other things, information on the new style investment policies and guidance on migration from a secondary listing to a primary listing. A summary of the main points is set out below.
Investment policies - requirement to publish a more detailed policy relating to asset allocation, risk diversification and gearing
The UKLA has provided guidance on the characteristics it would expect a new investment policy to include. As the Listing Rules indicate, the policy should address, as a minimum:
- 'asset allocation' - the policy should indicate how the funds available are to be invested, for example a high-level description of the target asset classes and sub-classes and proportion of the investment portfolio allocated to those asset classes
- 'risk diversification' - the policy should include firmly stated maximum exposures (either "at acquisition" limits or limits which apply at all times depending on what the board deems appropriate)
- 'gearing' - the policy should establish a firm maximum
- difficult to understand legalese and technical jargon should not be used
- the policy should be useful and definitive
The UKLA is unlikely to deem a reformulation of the investment policy to be a material change requiring shareholder approval where the new style policy simply describes the existing position with greater clarity. The UKLA is, however, likely to interpret any investment activity beyond the limits formerly in place under the old Listing Rules to be a material change and therefore require shareholder approval.
Although this guidance is helpful, the requirement to publish a more detailed policy applies to all report and accounts published after 28 September 2007, not just to companies with year ends after this date. The AIC is particularly concerned by this challenging timetable, especially for companies with year-ends between May and September 2007. The AIC has discussed these concerns with the UKLA. The UKLA has said that in circumstances where a board believes it will not be able fully to consider its investment policy in time for publication of the Company's annual report, the UKLA may be prepared to consider granting a waiver where circumstances are appropriate and proper applications are made. Whether such waivers will be available will depend on the circumstances of the company and will be at the discretion of the UKLA.
The AIC is expected to publish guidance on the new investment policy requirements in due course.
Migration from secondary listing under LR14 to primary listing under LR15
List! sets out the UKLA's practice for moving issuers from secondary to primary listing. In summary, the practice is as follows:
- determination of issuer's compatibility with LR6, LR15 or LR16 – the sponsor to set this out in a letter to the UKLA following which the UKLA will have at least 10 clear business days to review compatibility. Once compatibility has been agreed, a separate letter to be sent to Listing Applications confirming the intended date of migration.
- shareholder approval - the decision to migrate does not ordinarily require shareholder approval as the issuer will remain listed. Ancillary shareholder approvals could be required, for example if changes need to be made to an investment entity's investment policy.
A full version of List! 17 can be found at: http://www.fsa.gov.uk/pubs/ukla/list_nov07.pdf.