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The FSA is essentially Britain’s financial watchdog. As a matter of fact, the UK financial services industry in its entirety falls under this independent non-governmental body’s purview. Thus, with the large scope of affairs it oversees, the Financial Services Authority (FSA) undoubtedly has a diverse number of specialized roles. It is in its specific role as the competent authority under Part VI of the Financial Service and Markets Act (FSMA) that it is officially referred to as the UK Listing Authority (UKLA). In this specialized role, the FSA regulates the listing of companies and the issuance of securities on the London Stock Exchange and other financial markets in the UK.
Among the UKLA’s most vital tasks is the protection of financial security investors’ interests. The financial securities market is a risky one to deal with in itself. Therefore, adequate measures need to be taken to safeguard investors’ interests.
Generally speaking, the UKLA endeavors to safeguard investors’ interests through the enforcement of its Listing, Prospectus, and Disclosure and Transparency Rules.
The Listing Rules (LRs) set out mandatory requirements that must be met by companies that wish to list their shares or securities on a stock exchange. Areas covered under these rules include accepted principles on executive pay, compliance or justified non-compliance with the UK Corporate Governance Code, prospectus requirements (covered more extensively under the Prospectus Rules or PRs), and other vital matters relating to companies’ financial situations and intended stock details. Normally, in compliance with these rules, companies seeking to be listed on an exchange must disclose all required financial information and effectively prove that they are run properly.
Matters relating to listed companies being held accountable to their shareholders and stakeholders are covered under the Disclosure and Transparency Rules (DTRs). It is through the enforcement of these rules that the UKLA consistently strives to ensure that listed companies act in accordance with generally acceptable corporate governance and periodic financial reporting standards.
Many doubt that the FSA protective measures in place are in fact sufficient; and instances such as the Bumi (LSE:BUMI) incidence, which could easily have been avoided if appropriate measures had been in place, only serve to strengthen such doubts. It is only now that the FSA is beginning to work on closing the potentially damaging loopholes that are inherent in its stock market listing requirements. It is loopholes such as these that allow companies like Bumi to get away with not being properly vetted before they are granted listing on the stock exchange. One cannot help but wonder what other risks the FSA or UKLA might have overlooked or failed to account for in the formulation of its policies and regulations.
