Monday March 9 2020

News Source: Fund Regulation

Focus: General - Fund Regulation

Type: General

Country: UK




In February 2017, the FCA published a Discussion Paper on the Effectiveness of Primary Markets (DP). One of the topics covered was exchange-traded funds (ETFs) and whether the premium-listing obligations which apply to open-ended investment companies (OEICs), which are the legal form that ETFs usually take, should be dis-applied and OEICs should be listed in the standard listing segment.

The standard-listing regime is based on minimum EU directive standards and primarily focusses on transparency. The premium-listing regime sets requirements which exceed standard listing, including greater transparency and rights for shareholders.

Respondents to the DP agreed that there is limited rationale for the premium listing of OEICs and that, given the nature of their shares, a standard listing of these companiesā€™ units might be more appropriate. Therefore, in the Feedback Statement published in October 2017, the FCA committed to prepare rules for consultation for the standard-listing of OEICs. This commitment was also included in the 2019/20 Business Plan.

The consultation sets out how the FCA propose to make the necessary changes to the Listing Rules to create a more proportionate listing regime for OEICs in standard listing, whilst ensuring existing investor protections are maintained.

The consultation paper will be of interest to:

  • investors, including retail investors, who own shares in premium-listed OEICs or are considering investing in them
  • OEICs that already have a premium listing of their shares or are considering applying to the FCA for a listing
  • fund managers of OEICs
  • advisors to the above, including FCA-approved sponsor firms

Under the rules to be eligible for listing, OEICs must be authorised or recognised collective investment schemes (for example Undertakings for the Collective Investment in Transferable Securities or ā€œUCITSā€) under the FSMA regimes for funds. These authorisation and recognition processes require funds to meet appropriate standards so they can be promoted to the general public.

The current listing regime for OEICs was drawn up in 2007. At that time, the Listing Rules were tailored to account for the underlying funds regulation. However, more recent industry feedback has indicated further refinement to the Listing Rules would make the UKs listing regime more proportionate and operate more effectively: a significant proportion of the listing requirements for OEICs impose a layer of regulation on top of the funds regulation that already applies to these issuers and their fund managers through other rules. Consequently, these parts of the Listing Rules do not offer any appreciable value to investors, but they impose additional costs on issuers.

The FCA have proposed to change the Listing Rules applicable to OEICs to dis-apply or amend existing requirements that:

  • are disproportionate because they prescribe transparency and safeguards, including rights to shareholders, that are already present in underlying funds regimes under which the OEIC is already authorised or recognised; or
  • are not relevant or are inoperable for OEICs because they donā€™t take account of the specific features of OEICsā€™ business models or structures.

The FCA also want to make consequential changes which will align the UKs listing requirements for OEICs more closely with standard listing for shares in LR14 Standard listing.

Click on the above link for further information.