City fears over EC's 'rogues charter'

LAWS that give investors protection from unscrupulous companies floating on the London stock market will vanish under a rogues' charter proposed by the European Commission.

A delegation headed by the Treasury and the Financial Services Authority, the City regulator, is battling with Brussels to keep vital clauses in the Prospectus Directive, which will set new rules for flotations. It could become law this year.

But senior sources at the FSA have told Financial Mail it is 'inevitable' that British rules will be diluted as the price of harmonising European listing requirements.

Negotiators are furious that EU company listing rules will be adopted as a minimum standard while tougher British rules will be excluded.

British investors could lose out in three key areas:

The FSA requirement that companies joining the stock market must show they have 'sufficient working capital for 12 months' will be scrapped.

Directors will no longer have to sign a statement saying the details in the prospectus are 'true, fair and accurate'.

Companies will no longer have to show a three-year trading record that can be used for valuation purposes.

Ken Rushton, director of the UK Listing Authority, now part of the FSA, said: 'We are still in negotiations. We have no objections to the commission harmonising listing requirements, but we believe our tough rules are in the best interests of investors.

'And by excluding many of our tougher requirements, it seems standards are being rounded down instead of up.'

Meanwhile, fears are rising that the new rules will destroy specialist markets such as AIM, which promotes smaller firms.