FSA chief slams EC listing rules

FINANCIAL Services Authority chairman Sir Howard Davies has delivered a stinging rebuke to the European Commission, warning that its latest set of corporate laws would erode protection for UK investors.

The country's chief watchdog said the European Prospectus Directive, which could be implemented as early as next year, would nullify crucial UK listing rules relating to shareholders' voting rights, company reporting requirements and corporate governance codes.

This required Britain to devise other ways of ensuring the laws remained enforceable by taking them away from the FSA. This could be done by including them in a new Companies Bill or empowering the Stock Exchange to make them part of its listing requirements.

But there are fears in the City that both options are fraught with difficulties. It is felt such changes to company law would create a field day for lawyers, and involving the Stock Exchange would be a return to the days before the Financial Services and Markets Act, when the Exchange was the listing authority.

The directive will effectively be the 'maximum standard', meaning the FSA will be prevented from applying its own more-onerous requirements.

'In the aftermath of the Enron affair it is remarkable to think we may soon lose the the basis on which many corporate governance and disclosure provisions rest,' Sir Howard said. 'The (UK) regime is one which is attractive to both investors and capital raisers.'

He said it was wrong to argue that competition among EU regulators would see investors shift to the leastonerous regime. 'That seems highly unlikely to me, especially at a time when investors are, not unreasonably, nervous about unconventional corporate structures and opaque accounts,' he said.