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Relationship between UKLA and the London Stock Exchange
This note provides an overview of the functions of the UK Listing Authority and the London Stock Exchange in relation to applications for the listing and trading of securities.
On 1 May 2000, the London Stock Exchange’s (LSE) function as the competent authority for listing was transferred to the United Kingdom Listing Authority (UKLA), a division of the Financial Services Authority (FSA). The transfer was made because of concerns that the LSE’s demutualisation could lead to conflicts of interest in its role as a regulator and a profit seeking organisation. On 17 November 2003, the UKLA merged with the Markets and Exchanges Division of the FSA to form one division known as the Markets Division. The particular departments of the Markets Division are still referred to as the UKLA when acting as such. This note sets out the functions of the UKLA and LSE.
The UKLA is a division of the FSA which now forms part of the Markets Division. The UKLA is structured as follows: • Company Monitoring: • Advises on and monitors continuing compliance with the Listing Rules and Disclosure and Transparency Rules, including announcements of inside information, notification of major interests in shares and the Model Code. Advises and monitors full and timely disclosure of inside information. May temporarily suspend a company from listing where a disorderly market may develop.
• Listing Applications: • • • Maintains the Official List. Processes applications for the listing of securities. Issues notices in relation to suspensions, cancellations and restoration of listings.
• Equity Markets Group:
Separation of listing and trading Following the transfer of the competent authority for listing to the UKLA. Trading is a requirement for listing and vice versa. there is a distinction between being admitted to listing and admitted to trading.com/2-107-4008 2 . • The company’s securities need to be admitted to trading by the LSE. Reviews and approves prospectuses for equity securities. • Enforcing compliance with the Listing Rules and the Disclosure and Transparency Rules (including suspension and cancellation of listing.Relationship between UKLA and the London Stock Exchange • Deals with equity queries arising from written submissions and calls to the UKLA’s equity helpdesk (including queries in relation to class tests) Assesses the eligibility of companies seeking to list equity in London. Instead. Issuers who want their securities admitted to the LSE’s markets for listed securities must follow a two stage process: • The company’s securities need to be admitted to the Official List by the UKLA. reviewing and amending the Listing Rules. Only when both of these processes have been completed will the securities be officially listed on the LSE. • Making. This means two sets of fees and two sets of continuing obligations. Reviews and approves certain circulars to be issued by companies with a premium listing of their equity shares. if necessary). • • • • Global Debt Group: • • Assesses the eligibility of companies seeking to list debt in London. www. and the Disclosure and Transparency Rules. Reviews and approves prospectuses and listing particulars for debt securities and global depositary receipts. so that a suspension from trading will lead to a suspension of listing by the UKLA. Approach and role of UKLA Role The UKLA’s main responsibilities are: • Admitting securities to listing on the UK’s main market.practicallaw. • Sponsor supervision: • Deals with queries in relation to new sponsors and general queries on LR 8. being listed on the LSE no longer means the same as being "officially listed".
Admission to listing In considering an application for listing. continuing obligations or application of the rules.this involves an issuer or its advisers: • Completing an Application for Admission of Securities form. The UKLA’s Listing Applications team maintains the Official List of the FSA. • Arranging a listing hearing. www. Listing. acquisitions and disposals under the various class tests and transactions with related parties. including rules relating to disclosure of information. • The Combined Code: overview. approves listing particulars and other documents requiring review and approval.practicallaw. • Submitting the required application documents to Listing Applications. • Prospectus Rules: these contain rules and guidance on the requirements to publish a prospectus. They contain: • Listing Rules: these contain the Listing Principles. The team processes applications for the listing of securities and issues notices in relation to suspensions. Prospectus. rules and guidance on listed companies’ continuing obligations and the sponsors’ regime. Prospectus. Disclosure and Transparency Rules form a block of the FSA Handbook. the UKLA: • Must satisfy itself that all the relevant conditions for listing have been met by an issuer. To gain admission of securities to the Official List an issuer must make an application for Listing to the Listing Applications team . Admission of the securities to the Official List becomes effective when the FSA’s decision to admit the securities to listing has been announced pursuant to paragraph 3.com/2-107-4008 3 .Relationship between UKLA and the London Stock Exchange • Making day to day decisions on listing matters. • Submitting the required listing fee. See Practice notes: • Disclosure Rules: disclosure and control of inside information • Listed and public company issues: acquisitions. Listed issuers have continuing obligations under the Listing Rules (and disclosure obligations under the Disclosure Rules). Disclosure and Transparency Rules The Listing.7G of the Listing Rules in a "Dealing Notice". • Examines and. if appropriate. whether relating to applications for listing. the approval process and contents of a prospectus. cancellations and restorations of listings.2. Listed issuers are also still required to have a model code governing share dealings by persons discharging managerial responsibilities and state the extent to which they meet the Combined Code on corporate governance. • The Model Code.
see Practice note.com/2-107-4008 4 . Continuity of approach was maintained by transferring the LSE staff on to the UKLA team. Compliance In addition to the UKLA’s ability to suspend or cancel listings and censure issuers. The Financial Services and Markets Act 2000 (FSMA) sets out the duties of the competent authority with regard to the making of Listing Rules.Relationship between UKLA and the London Stock Exchange • Transparency Rules: these relate to major shareholdings and the notification and dissemination of information by issuers of transferable securities. • Facilitating innovation in respect of listed securities. For further details. • The burden of regulation must be proportionate to the benefits it brings. Prospectus.) Future of the UKLA On 26 July 2010. Prospectus. • Disclosure Rules: these contain rules and guidance on listed companies’ obligations to disclose and control "inside information" and notify transactions by persons discharging managerial responsibilities. Disclosure and Transparency Rules: overview. It must have regard to: • Proportionality of regulation. Listing. views are requested on whether the UKLA should be merged with the Financial Reporting Council under BIS or whether it should remain within the www. the LSE is able to halt trading where there is a disorderly market. The consultation paper sets out further details of the proposals already outlined by HM Treasury for new bodies to be established to replace the existing tripartite regulatory structure. the LSE’s two market practitioner advisory committees were also transferred to the FSA.practicallaw. HM Treasury published a consultation paper setting out and seeking views on the government’s proposals for reform of the UK financial regulatory system. including the UKLA’s ability impose fines. In recognition of the concern that issuers could therefore face investigations and penalties from both bodies. Disclosure and Transparency Rules: enforcement and remedies. In addition. Listing. (Section 73. With regard to listing and related activities. These two groups are an important source of practical market advice and continue to play a key advisory role. • Improving competitiveness: both of the UK’s capital markets internationally and between listed securities. Approach When the transfer of competent authority for listing came into effect. the UKLA adopted a "business as usual" approach to the listing role. the FSA potentially has a different approach to regulation. FSMA. Despite these elements of continuity. For further details. see Practice note. the UKLA liaises with the LSE to minimise problems in this area. • Maximising its own effectiveness.
For further details. The Standards deal with: www. The responses will be used to develop more detailed proposals and draft legislation which will be published for consultation in early 2011. The LSE retains discretion and flexibility in applying the Standards. HM Treasury consultation on new UK financial services regulatory structure: listing and related activities. They do not apply to companies admitted to AIM. Admission to trading When applying to the LSE’s markets for the first time. The Standards have been revised annually since that date and are available on the LSE’s website.com/2-107-4008 5 . Responses to the current consultation are requested by 18 October 2010. Initially there will be a meeting between the company. the Consumer Protection and Markets Authority (CPMA). in appropriate circumstances. Approach and role of LSE Role The LSE’s main responsibilities are: • Admitting securities to trading. • Understanding the company’s business. There is then an application form to complete for admission to trading.Relationship between UKLA and the London Stock Exchange markets division of one of the proposed new regulators. so that. including: • How the LSE can support the company through the admission process. • Operating its Regulatory News Service (RNS). Admission and Disclosure Standards The LSE first published its own Admission and Disclosure Standards (the Standards) on 1 May 2000. • Publishing its Admission and Disclosure Standards. • How the LSE can help to raise the profile of a company coming to the market. its professional advisers and the LSE to discuss a variety of issues. They contain the admission requirements and the ongoing disclosure requirements which companies whose shares are admitted to trading on the LSE’s main market have to observe. companies should approach the LSE as early as possible and certainly no later than the time they approach the UKLA regarding admission to the Official List. • Investigating unauthorised disclosure of price sensitive information. see Legal update. • Explaining the company’s responsibilities once admitted.practicallaw. they can be tailored to meet an individual company’s needs.
• Promoting investor confidence in the markets operated by the LSE. was not part of the listing authority function and remained with the LSE post transfer of the competent authority for listing. • Operating proper and orderly markets. For further details. listing particulars or other circulars. • The application process.Relationship between UKLA and the London Stock Exchange • Admission requirements. • Continuing obligations. the LSE set up a Company Services department. see Practice note. As part of the LSE’s development and maintenance of the Standards. But it does not review draft prospectuses. Company Services processes applications for admission to trading. it will comment on any proposed changes to the Listing Rules. • Assist companies through the listing and admission process.practicallaw. (For example. This choice brought an end to the LSE’s monopoly of release of such information through its RNS. meetings and publications). conferences. Regulatory Information Services The RNS. as this is done by the UKLA as part of the listing process. seminars. which was and still is operated by the LSE for regulatory announcements. Approach In 2000. there will be networking events and other relationship management initiatives). • Develop and maintain relationships with companies once they have been admitted. The objectives of this department are to: • Attract new companies to the LSE’s markets (through presentations. The current RISs are listed on the FSA’s website. there will be a named contact through whom queries can be channelled.com/2-107-4008 6 . • Maintaining the quality and attractiveness of its markets to companies and investors. Regulatory Information Services. Since 15 April 2002 listed companies have had a choice of RIS through which they can release their regulatory announcements. • Provide the necessary infrastructure to support the LSE in its dealings with companies. • Minimising any overlap with the rules of an issuer’s EEA competent authority. www. The key principles behind the Standards are: • Providing companies which meet the admission requirements with access to the LSE’s markets.
to ensure that regulation of the LSE is to be retained by the FSA if the LSE does fall into foreign ownership. made an offer to acquire the LSE for 1243p per share in cash. but that it would allow the mergers on condition that each party gives undertakings to implement a package of structural and behavioural remedies to ensure the independence of LSE’s clearing provider.9% of the LSE’s shares. arrangements. the Swedish company. prompting the FSA to release a statement on the potential long-term implications of a takeover of the LSE. The FSA is given similar powers in relation to bodies applying for recognition as a UK investment exchange or clearing house. The OM bid failed in November 2000. OFT publishes reference decisions in London Stock Exchange bids). • In November 2006. there has been intense activity concerning the future of the LSE. which has built up a 20% stake in the LSE. claiming that the iX proposal was flawed. In May 2000. the LSE backed out of the iX deal after Deutsche Börse announced that it was keeping its options open as regards the merger. leaves the LSE exposed as an easy takeover target). announced a hostile offer for the LSE in August 2000. Then. guidance. regulated by the FSA. on 1 November 2005. In March 2005 Deutsche Börse withdrew its bid as it had failed to convince the LSE to recommend the offer but it reserved the right to make an offer if Euronext or another third party were to announce an offer for the LSE. • In December 2005. the LSE rejected a £1. in September 2000.5 billion takeover offer from Macquarie Bank.practicallaw. Nasdaq. Meanwhile. or in such other circumstances as are permitted by the UK Takeover Code. On 1 December 2005. rules. The LSE’s status as a public listed company means that it is more susceptible to takeover by another exchange: • In 2004/2005 both Deutsche Börse and Euronext made takeover bids for the LSE. policy or practice) of UK recognised bodies if it appears to the FSA that the changes would be disproportionate to the end the provisions are intended to achieve or would not pursue a reasonable regulatory objective. On 7 April 2005. www. However. OM Group. the Competition Commission announced that it has confirmed its provisional finding that the anticipated acquisition by either Deutsche Börse or Euronext might be expected to result in a substantial lessening of competition. the LSE announced its intention to list its shares and in July 2001 an extraordinary general meeting of the LSE removed the 4. The LSE obtained an introduction to the Official List of the UKLA in July 2001 and admission to trading on the LSE’s main market. the Investment Exchanges and Clearing Houses Act 2006 provides for the amendment of Part 18 of FSMA to enable the FSA to veto changes to the regulatory provisions (that is. some investors believe.Relationship between UKLA and the London Stock Exchange Future of LSE In recent years. partly owing to a restriction in the LSE’s articles which prevented an individual shareholder from holding more than 4. The board of the LSE rejected the offer on the basis that it undervalues the company. the Office of Fair Trading published the full text of its decisions to refer the proposed bids for the London Stock Exchange plc by Deutsche Börse and Euronext to the Competition Commission under the Enterprise Act 2002 (see Legal update.9% restriction (which. The new entity was to be called iX and was intended to create a London-based market for the top EU companies. the Competition Commission published an administrative timetable for negotiation of the undertakings. the Frankfurt and London exchanges announced their plan to merge.com/2-107-4008 7 . In May 2001. Meanwhile.
have any effect on the nationality of the ownership of recognised bodies).Relationship between UKLA and the London Stock Exchange These powers are intended to ensure that the ownership of exchanges does not affect the existing light-touch risk-based regulatory regime for recognised bodies (it will not. www.practicallaw. Note that on 1 October 2007.com/2-107-4008 8 . the LSE merged with Milan’s Borsa Italiana. however.
practicallaw. Prospectus.practicallaw.com/1-200-7730) · The Model Code: the 1 July 2005 regime (http://www.practicallaw.com/T1185) · Financial Services and Markets Act 2000 (http://www.com/topic4-380-7427 · London Stock Exchange · http://www.Relationship between UKLA and the London Stock Exchange Article Information RESOURCE INFORMATION The fulltext is available at http://www.com/A22830) · Disclosure Rules: disclosure and control of inside information (http://www.practicallaw. Prospectus.practicallaw.practicallaw.com/topic6-103-1366 References · locator (http://www.com/topic1-103-0717 Subject · FSMA: introduction · http://www.com/1-203-5634) · London Stock Exchange (http://www. Disclosure Primary Sources: FSAH LR: 3.2 Application for admission to listing (http://www.practicallaw.com/topic9-103-1355 Disclosure · Listing.com/topic8-103-2096 and Transparency rules · · International Offerings · http://www.com/1-202-2033) · Listing.practicallaw.practicallaw.practicallaw.practicallaw.com/1-200-8819) · Listing.practicallaw.com/T1154) · FSA (http://www.practicallaw.com/T2030) · Corporate governance and the Combined Code (http://www. Prospectus.com/2-107-4008 General · Article ID: 2-107-4008 · Document Generated: 27-Jul-2010 06:54:40 Jurisdiction · United Kingdom · http://www.practicallaw.com/2-107-4008 9 . http://www.practicallaw.com/0-501-4233) · Listed and public company issues: acquisitions: the 1 July 2005 regime (http://www. Disclosure and Transparency Rules: overview (http://www.com/3-203-3785) www.practicallaw.com/3-203-2677) · Regulatory Information Services (http://www.practicallaw.practicallaw.