UK Securities Law Update - Q1, 2011

Introduction

In this edition of our UK Securities Law Update we look at the proposals contained in the HM Treasury's latest consultation paper on the reforms to the UK financial services regulatory architecture. We also discuss the amendment made to the Financial Services Authority's Code of Market Conduct following the recent decision of the European Court of Justice ("ECJ") in Spector Photo Group NV, the findings of the market study of equity underwriting conducted by the Office of Fair Trading ("OFT"), as well as the London Stock Exchange's Alternative Investment Market's latest newsletter. Finally, we consider the proposed EU amendments to the Prospectus Directive and the Transparency Directive, as well as the new supervisory framework for financial services in Europe.

1. Reforms to UK Regulatory Architecture

   On 17 February 2011, the UK HM Treasury published a consultation paper providing further detail on the Coalition Government's proposals for reforming the framework of financial regulation in the UK. The paper builds on the Government's earlier consultation, published in July 2010, which proposed the abolition of the current tripartite system of regulation of the Financial Services Authority ("FSA"), the Bank of England ("BoE") and HM Treasury. From a securities law perspective, we now have more clarity as to how the regulation of listings and market supervision will be structured going forward.

   The proposed framework of financial regulation is as follows:

   Financial Policy Committee ("FPC") – this committee within the BoE will be responsible for delivering systemic financial stability through macro-prudential regulation. An interim FPC has already been established. As a policy committee with responsibility for regulation of stability and resiliance of the financial system as a whole, the FPC will not supervise financial firms or markets directly; Prudential Regulation Authority ("PRA") – the micro-prudential regulation of individual firms will be transferred to the PRA, a subsidiary of the BoE, which will authorise and supervise all banks, building societies, credit unions and insurers, as well as certain investment firms Financial Conduct Authority ("FCA") - the body labelled as the Consumer Protection and Markets Authority in earlier consultations has been renamed the Financial Conduct Authority. The FCA will be a standalone independent regulator, operating under the recommendations and directions of the FPC, and will be responsible for the supervision of market discipline, including enforcement of market abuse. It will also be the body that represents the UK's interests in the European markets regulation of the new European Securities and MarketsAuthority (see below). In addition, the UK Listing Authority ("UKLA"), a division of the FSA, which...