The Association of Investment Companies appears to have won its argument against key reforms to the UK listing regime of overseas firms which could have been detrimental to consumer protection.
Details of a policy update paper issued this morning suggest the FSA has listened to industry arguments about its proposals to produce a two-tier listing regime for UK companies which would have meant overseas firms – including investment trusts – would not be subject to the same stringent requirements as UK-based operations.
The AIC had previously argued while it understood the FSA’s desire to reduce regulation under a principles-based regime, consumer protection could be at risk from overseas firms because they would be able to implement lower levels of protection under the ‘super-equivalent’ rules taken from the EU directive minimum regime – essentially giving overseas firms the right to adopt only the standards required under EU directive – compared with those applied to their UK competitors.
Today’s announcement, however, indicates the FSA has taken on board this argument and will now consult the industry again in June about proposals for a single listing regime “for all closed-ended investment funds, irrespective of domicile”.
The FSA says its June paper will be based on the broad framework set out in Chapter 15 for a super-equivalent scheme applying to all funds, which is deregulatory in nature but also maintain “appropriate protections” for consumers”.
Responding to the announcement, the AIC says it is expressing “strong support” for the single listing regime which will “maintain proper level of investor protection” but keeps the UK market attractive to new listings.
Daniel Godfrey, director general of the AIC, says while the issues are complex, the trade body believes the FSA’s decision is right for all concerned.
“We have always been convinced that it was possible to construct a single regime that would deliver the “best of both worlds” and although we knew that this view was not unanimously shared, the FSA has listened to the strength and breadth of support for our position and has reached the right conclusion,” says Godfrey.
“Principles-based regulation is hard to achieve, because people like the certainty they get from black and white rules. But success would deliver both increased innovation and entrepreneurial activity. So we hope, that in the forthcoming consultation, both regulators and regulated will do more than pay mere lip service to the concept of principles-based regulation,” he adds.
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