1. The FSA CP12/25Enhancing the effectiveness of the ListingRegime and feedback on CP 12/2 A CEI Compliance Information Presentation

2. Is it Relevant?This presentation may be of interest to UK and overseas issuers withUK-listed securities or considering a UK listing of their securities;firms advising on the issuance of UK-listed securities; and firms orpersons investing in or dealing in UK-listed securities. Call 0800 689 9 689 3. What is the Background?The FSA published CP12/2 in January 2012setting out some of itsproposals for changes to the considerable and substantive content ofthe Listing Rules; Prospectus Rules; and Disclosure Rules andTransparency Rules which it identified as being necessary for changeto ensure that the operational effectiveness of the Listing Regime ismaintained. The changes sought to ensure that the Rules properlyreflect recent changes in contemporary market practices and sowould allow the UK Listing Authority (UKLA) to continue to meet itsobjectives.This consultation paper raised some wider issues concerning thenature of the premium listing standard and undertook, dependantupon responses, consideration to developing specific options orproposals for discussion in a further paper. Call 0800 689 9 689 4. What is the Background?CP 12/25 entitled Enhancing the effectiveness of theListing Regime and feedback on CP 12/2 covers thefeedback relating to the earlier document and includesfinal rules.The latter part of the paper contains a consultation onproposed amendments to the Listing Rules to enhancethe effectiveness of the Listing Regime, and providesdraft rules.In the second part of the paper the regulator is alsoconsulting on proposed amendments to the Listing Rulesrelating to the implementation of the AlternativeInvestment Fund Managers Directive (AIFMD), again withdraft rules. Call 0800 689 9 689 5. What is the Background?The FSA published CP12/2 in January 2012setting out some of itsproposals for changes to the considerable and substantive content ofthe Listing Rules; Prospectus Rules; and Disclosure Rules andTransparency Rules which it identified as being necessary for changeto ensure that the operational effectiveness of the Listing Regime ismaintained. The changes sought to ensure that the Rules properlyreflect recent changes in contemporary market practices and sowould allow the UK Listing Authority (UKLA) to continue to meet itsobjectives. Call 0800 689 9 689 6. So What Does It Say?45 respondents to the first CP represented a good cross-section of itsstakeholders generally, and overall appeared very supportive of theproposals. Although there were some relatively minor amendments,the FSA is, to a large extent, proceeding as proposed.On 1 October 2012 the rules detailed within CP 12/2 from January2012 became effective, with the exception of the new rules forSponsors, which will take effect on 31 December 2012.Be aware that because some of the new rules relating to ReverseTakeovers and Financial Information make new rules imposingobligations to appoint sponsors, the FSA has made transitional rulesto suspend the operation of these rules (or the parts affected) until31 December 2012.The specific rules affected in this way are:LR 5.6.6R; LR 5.6.13R; LR 5.6.17R; LR 5.6.26R; and LR 13.5.27BR. Call 0800 689 9 689 7. New Rule?The regulator is also making a new rule LR 9.2.20Rrelating to Externally Managed Companies transitionalin order to mitigate costs of restructuring, for thepremium listed issuers who currently use an externalmanagement structure.This new rule will not come into force until 1 January2014, which is designed to provide issuers affected bythis rule the opportunity to give notice on their existingexternal management contracts and put newarrangements in place. Call 0800 689 9 689 8. Enhancing the effectivenessThe FSA explained in CP 12/2 that its overall and continuing purposein regularly reviewing the Listing Rules was to ensure that theyreflect properly changes in market practice and so allow the UKLA tomeet its objectives of:providing an appropriate degree of protection for investorsin listed securities;facilitating access to listed markets for a broad range ofenterprises; andseeking to maintain the integrity and competitiveness of UKmarkets for listed securities.In alignment with that statement, they now set out proposals forconsultation on a range of technical issues; it also presents thefeedback and sets out its final policy positions in the Feedbacksection of CP 12/25. Call 0800 689 9 689 9. Enhancing the effectivenessRegarding the proposals relating to externally managed structures,the regulator has taken the broader view that their managementarrangements and provisions for accountability to shareholders werenot consistent with the high standards that the FSA attaches to thepremium listing benchmark.CP12/2 initiated a high-level discussion of the wider issuessurrounding the quality of the premium listing regime, the free float,minority shareholder protection (especially in situations where thereis a controlling shareholder) and governance.The regulator states that its analysis of the various issues raisedduring consultation suggests that the underlying concerns of marketparticipants do not represent systemic failure of the Listing Regime. Call 0800 689 9 689 10. Enhancing the effectivenessDespite this, the FSA recognised that the concerns mayrepresent the beginning of a longer-term pattern ofissues that could continue to grow in severity if no actionwere taken and risk undermining the integrity of theListing Regime. They therefore concluded that theconcerns mostly relate to misaligned behaviour in someareas, so they conclude that there is no single remedy. Itsproposals should therefore be seen both as individualmeasures which are designed to correct specific points ofmisaligned behaviour but which it also intends to betaken together as a restatement of what the regulatorsees as the high standards of governance required ofPremium listed issuers.Call 0800 689 9 689 11. The ProposalsThe proposals represent a significant enhancing of the ListingRules in the area of governance but at the same timerecognise the potential for the standard listing segment toaccommodate issuers that are not yet able to comply with thestrict requirements applicable within the premium segment:Optimising the entry criteria to the Premium segment so asto maintain the strength of the Premium Listing brand: implementing the concept of a controllingshareholder and requiring that an agreement is put in place toregulate the relationship between such a shareholder and thelisted company; insisting on a majority of independent directors onthe board where a controlling shareholder exists; and prohibiting certain voting arrangements which lowerinvestor protection within the premium segment. Call 0800 689 9 689 12. The ProposalsEnsuring that the eligibility requirements continue to applyas meaningful ongoing obligations: requiring a premium listed issuer to notify the FSAwhen it is not in compliance with its ongoing obligations; introducing a new dual voting requirement for theelection of independent directors; providing guidance on what constitutes anindependent business that is eligible for premium listing; clarifying the requirement for an applicant to controlthe majority of its business and providing guidance regardingareas where such control may not exist; mandating the content of a relationship agreementand requiring that it is adhered to on an ongoing basis; and empowering independent shareholders to approvematerial changes to the relationship agreement.Call 0800 689 9 689 13. The ProposalsClarifying the operation of the free-float provisions: explicitly excluding shares subject to a lock upfor a prolonged period, since they do not provide anyliquidity; detailing the circumstances where the regulatormight consider modifying the 25% free-floatrequirement, indicating that any modification beneath20% would be unlikely; and removing the requirement for a minimumabsolute percentage free float within the standardsegment, provided that sufficient liquidity is present.Call 0800 689 9 689 14. The ProposalsProviding shareholders with better quality information: requiring fuller and more comparable disclosures forsmaller related party transactions in the annual report; mandating disclosure in an annual report made as aresult of the issuers premium listing to be clearly identifiableas such; introducing statements regarding the operation ofthe relationship agreement on an annual basis; and clearly expressing the applicable standard whenassessing compliance with the UK Governance Code withrespect to directors knowledge of their responsibilities andobligations, including fiduciary duties (or local equivalent). Call 0800 689 9 689 15. The ProposalsIn addition to the above, the regulator has taken theopportunity to review the Listing Principles as well as thescope of their application. Currently, the Listing Principles onlyapply to companies that have a premium listing of equityshares with the result that certain expectations that the FSAwould expect to apply across all listed companies have beenperceived as pertaining only to premium listed issuers.The FSA is proposing that two of the existing six ListingPrinciples should be applicable to all listed companies. It hasalso proposed some amendments that it believes areappropriate and added some new principles to the PremiumListing Principles to ensure that they better reflect the highstandards applicable within the premium segment.Call 0800 689 9 689 16. Implementation of the AlternativeInvestment Fund Managers DirectiveSome respondents did acknowledge the potential for conflict,but overall the regulators original policy proposal was notsupported. The respondents general view was that it would bebetter to be less prescriptive and it is considered in thoseresponses that there is good evidence for market-basedsolutions.The FSAs revised proposal introduces a rule requiring boardsof listed issuers to effectively monitor and manage theperformance of their key service providers, which includesinvestment managers. The regulator will expect boards toensure appropriate contracts are in place upon listing and toensure they are in a position to take action if the contractualobligations are breached or the contractual arrangements areno longer in the best interest of shareholders.Call 0800 689 9 689 17. Implementation of the AlternativeInvestment Fund Managers DirectiveThe regulator states that this rule clearly articulates itscurrent (and continuing) expectations of the boards oflisted investment entities, but allows each issuer to findan individual solution for dealing with any conflictsarising.The FSA is seeking feedback on all aspects of its paper.Comments in relation to the consultative sections of thepaper must be submitted by 2 January 2013.The FSA intends to publish its feedback in the spring of2013. Call 0800 689 9 689 18. What Is This Presentation This is a regulatory summary service provided by CEI Compliance Limited, The UKs Fastest Growing Alternative Regulatory Consultancy We can only advise on the salient points in this summary and if you want further details then we would suggest you access the full document from the FSA Website at http://www.fsa.gov.ukCall 0800 689 9 689 19. So Who Are CEICompliance?The Fastest Growing Alternative UKRegulatoryCEI Compliance have been providing Consultancyrisk and compliance services to allsizes of regulated firms from start-upbanks and FTSE100 companies to IFAsand small Wealth Managers.Provide a Discrete Service for Remedial and Proactive Risk & ComplianceThe key to our success is that thosewho need to know refer us to others.We are a well kept secret who placesconfidentiality and honesty as two ofHave an Ultimatetheir highest values. Goal of Improving Our Clients PositionBig enough to becredible,Small enough tocare Call 0800 689 9 689 20. Areas of WorkingBecause of our reputation of Areas of Workdiscretion and confidentiality weRemedial with NDAoperate under Non-DisclosureAgreements for roughly 2/3rds ofour work Governance with no NDAExternal to this the breakdown ofour work is roughly split with 50%62%Risk & Compliance and 50%Governance. 21%8%9%CEI Also trade under ComplianceConsultant(www.complianceconsultant.org) andS166 Reports (www.S166reports.co.uk)Source: CEI Stats June 2012as separate businesses. Call 0800 689 9 689 21. Isnt Bigger, Better?Generally, No.Its usually just more expensiveFortunately, there are more positive alternatives tousing a niche consultancy compared to theAccentures, McKinseys or the big accountancy firms likeDeloitte, E&Y etc.We not only consider that size doesnt matter, but largesize can actually be a disadvantage in meeting yourneeds. Call 0800 689 9 689 22. Dealing with a nicheconsultancyYou are always dealing with the principal when you aredealing with my firm. This means that I, the MD, are therelationship manager and there is no junior partner to whomresponsibility will be transferred. There is no decreasedaccountability, no "hand-off" to a less-informed colleague. Ifyour interests are at stake continually, shouldnt youreasonably expect my continual involvement?We can usually provide resources on a "just in time"basis. That is, our projects do not have to cover excessiveoverhead, such as multiple offices, large administrativebackup, recruiting, partner perks, etc. We are organised toefficiently provide everything that you, as the buyer needs, butnothing more than that which means that you are paying forvalue and results and only minimum overhead.Call 0800 689 9 689 23. Dealing with a nicheconsultancyThere is more likelihood of your privacy andconfidentiality being observed with fewer peopleworking on the project. We (and/or the few people wemight also involve) are constant which means that thereisnt the need to sift through dozens of differingperceptions.Were faster. We can respond to requests quickly, andreturn all calls within four hours which means to youthat there is no need to worry about a bureaucracy,delays and unknown people on the other end of thephone. Call 0800 689 9 689 24. Dealing with a nicheconsultancySince we handle fewer concurrent projects than largerfirms, our attention is focused on the job at hand. This meansthat you dont have to "compete" with another dozen or so ofour clients, which may be larger, paying more or are moretime-demanding. We structure our work so that everyclient receives maximum attention.Your investment is controlled. There is no "meterrunning". We work for a fixed, value-based, project fee.Large firms cant afford to do that as readily because of all thepeople involved and their own insistence on measuring theirsuccess by billable hours. We measure our success by clientobjectives reached, not in time units. Call 0800 689 9 689 25. Dealing with a nicheconsultancyThe expertise that larger firms use is often white-labellingfor them by a pool of consultants available in themarketplace at any one time. We select our consultantsfrom practising subject matter experts whichmeans that you obtain the same or better expertise forless money, because;Inevitably, we are less expensive. There areeconomies to using someone who can base their fees oneach situation and not on a pre-determined service scaleor need for reaching a practice quota. This means quitesimply better value to you.Call 0800 689 9 689 26. And, additionallyThe benefits of dealing with the ComplianceDoctor and CEI Compliance is;A firm with experienced and qualifiedconsultants;A firm that can apply changes and needs in acommon sense way that is practical andeffective;A firm that is considered and respected asindependent and reliable by the FSA;A firm that provides you with unfettered accessto the principle immediately and on demand; Call 0800 689 9 689 27. What Makes Us Different? Phase 1 We will conduct an initial appraisal at our cost only charging for expenses Phase 2 We will make a proposal based on our appraisal with your outcomes and needs Phase 3 We will discuss the precise scope with you and provide you with a project price We will complete the work to your original Phase 4 scope and satisfaction Each proposal deserves to be as unique as afingerprint 28. Who Are Our Clients?text.We have a wealth of Financial Services Experience, anddue to the remedial and sensitive nature of our workforming over 60% of our business and that is conductedunder a Non Disclosure Regime, we cannot demonstrateevery client. 29. Who Are Our Clients? We also have a large amount of experience in a number of other fields and industries within the major utilities and even Local Authorities. 30. Questions? More Information?CEI Compliance Limitedwww.cei-compliance-limited.co.uk Call0800 689 9 689Email info@ceicompliance.co.uk