Select Committee on Delegated Powers and Deregulation Seventh Report





1.  Clause 73 places a duty on the competent authority to maintain the official list. To allow it to do this in a way which can adapt to the changing circumstances of the markets and developments in technology, clause 73(4) confers on the competent authority the power to make listing rules. This carries forward the power in section 142(6) of the Financial Services Act 1986.

2.  The rules made by the current competent authority, the London Stock Exchange are contained in a publication known as the "yellow book". The rules govern the admission of securities to listing, the continuing obligations of issuers, the enforcement of those obligations and the suspension and cancellation of listing. The competent authority has discretion under clause 73(4) to make listing rules in order to fulfil its functions under the Act. This is a continuation of the powers of the present competent authority under Part IV of the Financial Services Act 1986 and it is envisaged that the present listing rules will continue to be applied when the competent authority function is transferred to the Authority.

3.  Clause 96 requires that listing rules must be made in writing and made available to the public. They may make different provision for different cases. Listing rules must be made by the competent authority's governing body under clause 72, or if made by a committee they must be confirmed by the governing body within 28 days.

4.  Aside from its general power to make listing rules, some of the provisions of Part VI give specific permission for the competent authority to make certain types of listing rules. These again reflect existing provisions in Part IV of the 1986 Act. The competent authority exercises its functions subject to the requirements of the relevant EC directives and this is reflected in many of the things which may be done in listing rules. These provisions are:

  • clause 74(4) which envisages that the listing rules will make provision as to the requirements which must be met before an application for listing is granted;
  • clause 76 which permits listing rules to make provision for the suspension or discontinuation of a listing (subject to the provisions of that clause);
  • clause 77(1) which allows the competent authority to make listing rules which provide that securities (other than new securities) may not be admitted to the official list unless the circumstances in that clause are met (these relate to the publication of listing particulars or other documents in accordance with EC directives);
  • clause 78(2) envisages that the listing rules may contain provision as to the information required to be included in listing particulars;
  • clause 82(1) which requires the competent authority to make listing rules which provide that new securities cannot be admitted to the official list unless the circumstances in the clause are met (these relate to the approval and publication of a prospectus, in accordance with EC directives);
  • clause 85(1) which allows the competent authority to make listing rules concerning the submission of prospectuses for approval (this relates to circumstances where EC directives permit a prospectus to be approved for the purposes of securing mutual recognition in other EEA states);
  • clause 93(1) which allows listing rules to be made which specify requirements to be met by issuers and to make provision for non­compliance (by virtue of clause 87 the competent authority may, in particular, impose financial penalties in respect of non­compliance with the listing rules, a new power which was not available under the 1986 Act); and
  • clause 95 which allows listing rules to require the payment of fees to the competent authority

5.  Part VI also sets out the appeal rights of those subject to disciplinary sanctions. Any changes to the rules are consulted upon. A number of changes to Part VI of the Bill were announced by the Economic Secretary to the House of Commons Standing Committee on 28 October. Among these were improvements to the accountability arrangements which will:

  • allow people to refer decisions of the competent authority to impose a financial penalty to the Tribunal created under the Bill;
  • place a statutory requirement on the competent authority to consult on rules and produce cost benefit analyses;
  • provide for the independent investigation of complaints against the competent authority.

6.  In carrying out its functions, including making listing rules the Bill will also be amended to require the competent authority to have regard to a number of principles, including proportionality and competition considerations.


7.  The scheme operator will have different legislative roles under the compulsory jurisdiction and the voluntary jurisdiction of the ombudsman scheme. However, complaints themselves will be determined by an independent ombudsman appointed by the scheme operator.

8.  Under the compulsory jurisdiction the scheme operator will be able to make procedural and costs rules relating to the scheme. The scope of these rules is restricted to persons (complainants or respondents) who are parties to an actual complaint which has been referred under the scheme. The scheme operator will be required to consult on and publish its procedural rules and they will be subject to the approval of the Authority.

9.  The voluntary jurisdiction (as the name suggests) is voluntary for firms which want to participate in the scheme, although in practice firms may be required to participate as a condition of membership of a trade or professional body sponsoring the scheme. Its scope could therefore be determined by private contract alone. Nevertheless the Bill provides for the scope of the voluntary jurisdiction to be determined by voluntary jurisdiction rules made by the scheme operator, and for procedural matters to be determined formally by standard terms.

10.  The Authority's approval is required for the making of voluntary jurisdiction rules and standard terms, and voluntary jurisdiction rules are subject to publication and consultation requirements under paragraph 22 of Schedule 16.

Compulsory jurisdiction



11.  Costs rules may provide for an ombudsman to have power, on determining a complaint under the compulsory jurisdiction, to award costs in accordance with the provisions of the rules. They may provide for an award against the respondent in respect of both the complainant's and the scheme operator's costs. However, they may only provide for an award against the complainant in respect of the scheme operator's costs (not the respondent's costs), if in the opinion of the ombudsman the complainant's conduct was improper or unreasonable or he was responsible for unreasonable delay. It is intended to introduce an amendment to require the scheme operator to consult on proposed costs rules as well as publishing them.

12.  The scheme operator's rules may also set out the procedure for reference of complaints and for their investigation, consideration and determination by an ombudsman. They may among other things:

  • Specify matters which are to be taken into account in determining whether an act or omission was fair or reasonable, for example relevant law and regulations (including Authority rules and regulatory guidance), relevant codes of practice and good industry practice.
  • Provide that a complaint may, in specified circumstances, be dismissed without consideration of its merits. For example:
    • where the complaint is frivolous or vexatious, or clearly does not have any reasonable prospect or success, or where the complainant has not incurred financial loss, distress or material inconvenience;
    • where the complaint is already (or has already been) subject to a separate dispute resolution process;
    • where the complaint is inappropriate for consideration under the scheme, for example because it concerns the legitimate exercise of a firm's commercial judgment to refuse credit or an underwriting risk, investment performance, employment or health or safety matters.
  • Provide for the reference of a complaint, in specified circumstances and with the consent of the complainant, to another body with a view to it being determined by that body.
  • Make provision as to the evidence which may be required or admitted, and any inferences that may be drawn.
  • Allowing an ombudsman to fix time limits.
  • Provide for certain aspects of the reference, investigation or consideration of a complaint to be done by a member of the scheme operator's staff instead of by an ombudsman. However, the complaint itself must be determined by an ombudsman.

13.  Scheme rules may also require a respondent to pay case fees to the scheme operator. These rules may among other things provide for the scheme operator to reduce or waive a fee in a particular case, set different fees for different stages of the proceedings of a complaint, or provide for fees to be determined in specified circumstances. However, because the scheme operator has no jurisdiction over authorised firms which are subject to the compulsory jurisdiction unless they are also respondents to a complaint, the scheme rules cannot be used to impose annual fees or subscriptions. Such fees are a matter for the Authority's rules under clause 228.

14.  Scheme rules may make different provision for different kinds of complaint.

Voluntary jurisdiction


15.  The scheme operator's powers to make voluntary jurisdiction rules under clause 221 are similar to those of the Authority in respect of the compulsory jurisdiction under clause 220. However, because participation is voluntary, there are additional provisions allowing participating firms to participate in respect of acts or omissions occurring before they decided to participate in the scheme.

16.  Because participation is voluntary, it is not necessary for procedural and other jurisdictional matters (including the ombudsman's powers to make determinations and awards and require information) to be subject to the same controls as for the compulsory jurisdiction, namely by specific provisions in the Bill and by procedural, funding or costs rules made by the Authority and the scheme operator respectively. Under the voluntary jurisdiction, such matters are instead the subject of the scheme operator's standard terms.

17.  The scheme operator is required to consult on and publish voluntary jurisdiction rules, and these and its standard terms also require the approval of the Authority.

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