By Simon Miller

Companies would not be able to use the ‘back-door’ of reverse takeovers to get a listing which they would not be eligible for according to proposed changes to the listing rules announced by the Financial Services Authority (FSA).

Taking into account market developments, the FSA added that current exemptions that remove some acquisitions from the reverse takeover requirements will be narrowed.

In addition, the proposals intend to clarify the UK Listing Authority’s (UKLA) expectations of sponsors -– for example by adding a rule that that the FSA can require a sponsor to confirm to the FSA that its client is complying with the listing rules – and whether any changes need to be made to the listing rules to provide additional protection to investors.

The UKLA also noted a growth in outsourcing of “significant management functions” to an offshore advisory firm which the authority termed “eternally managed companies.

As a result, the offshore advisory company is placed beyond the key controls within the listing regime, lessening the ability of shareholders to hold the real management of a company to account.

The FSA proposes to make the management of the advisory company responsible for any prospectus issued by the listed company and subject to existing rules about dealing in the shares of the listed company. In addition, externally managed companies would not be eligible for a premium listing, but they would still be eligible for a standard listing.

David Lawton, the FSA’s acting director of markets, commented: “It is important that the listing rules continue to keep pace with market developments and the needs of investors. We believe that this consultation, which proposes specific changes, but also invites debate about the corporate governance standards that should underpin the premium listing standard, will serve that purpose and welcome responses to help us maintain an appropriate regime for the UK.”

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