Financial regulator FSA announced new rules for listing which could see businesses with controlling shareholders shake up their board members with independent directors in order to remain listed on the FSA.
The new proposed changes are aimed at strengthening investor protection by enforcing wide ranging reforms for the UK’s listing rules. The financial watchdog, FSA proposed that companies with a controlling shareholder with more than 30% of the group’s shares should include a majority of independent shareholders onto its board. The proposed changes are currently subject to industry consultation, open until January.
FSA’s director of markets, David Lawton commented that the new proposed changes would strengthen investor protection by the new listing refime. It would be the primary responsibility of the shareholders to make use of the new provisions in an effective manner.
The proposed rules by the FSA is being seen as a tightening of the governance around reverse takeovers. The financial regulator also plans to close any loopholes that could allow ineligible companies to be listed. The FSA is also looking into making banks and brokerage firms more accountable for the companies that they float.
The latest changes comes in the wake of the recent Indonesian venture firm, Bumi a mining company that was listed on the LSE after a reverse takeover. The company started off as a shell company, Vallar; hunting for acquisitions financed by Nat Rotschild before taking a stake in the Jakarta based Bumi resources.
An inquiry is being launched into the alleged £309 million of potential financial irregularities in the Indonesian operations.
The proposed changes from the Financial Services Authority follows the tightening of the rules from the FTSE group last year which made it more stringent for entry requirements for companies to be listed in its indices with the requirement of having a minimum free float of 25%, a move to ensure minority shareholders to have a voice.
The FSA is the UK’s leading financial regulator that uses a wide range of rule making, investigatory and enforcement powers to fulfill the statutory objectives given by the Financial Services and Markets Act of 2000. The FSA is an independent body that does not receive any government funding but is accountable to the Treasury and the Parliament.