The Financial Services Consumer Panel has written to the FSA to say that their proposals to amend the stock exchange listing rules for offshore investment companies threaten to undermine investor protection.
Last December, the Association of Investment Companies called on the FSA to reconsider its latest proposals on listing rules for investment entities, warning of the potential dangers of a two-tier system.
FSA consultation CP06/21 is proposing to allow overseas investment companies to list under Chapter 14 with lighter obligations than UK based companies listing under Chapter 15.
This is with the aim of making the London Stock Exchange more attractive to non UK based companies to list in the UK.
These requirements were strengthened after the split-cap debacle in an attempt to stop a similar situation happening again but the AIC and The Consumer Panel have raised concerns that the move to change this could allow such a scenario being repeated.
The proposed change by the FSA could mean the reduction of protection measure such as the spread of investment risk, publishing of investment policy, prohibitions on substantial cross-shareholdings and the independence of board members and investment managers.
FSCP Chairman John Howard says: “We think that, with its current proposal, the FSA is at risk of making a serious mistake that will be damaging for investors and damaging for the confidence of the market. Indeed, a consequence would be that there would be a lighter touch regime for the companies which pose the greatest potential risk for investors – a reversal of the FSA’s normal risk-based policy.”