Rolet resists new financial regulator

Xavier Rolet, the chief executive of the London Stock Exchange, is leading the fight against government plans to create a super-regulator for companies by moving supervision of share and bond issues to the Financial Reporting Council (FRC).

Company directors and investors will write to ministers over the next few days to warn that transferring the UK Listing Authority (UKLA) from the Financial Services Authority would be a serious mistake. Mr Rolet will also write to the Treasury, warning the move could severely undermine the City's competitiveness.

Separate protests will be made by the National Association of Pension Funds, the Institute of Directors (IoD), the Association of British Insurers (ABI) and the Confederation of British Industry (CBI).

The UKLA move was included in regulatory reforms that will split the FSA's functions between the Bank of England and a new Consumer Protection & Markets Authority (CPMA). But ministers planned to add the listing authority to the FRC, a body originally formed to monitor company accounts.

Most of the critics argue the listing functions should go to the new consumer watchdog rather than the FRC. It has already gained responsibilities for producing the accounting and actuarial standards used by all companies, insurance firms and pension funds; auditing practices and inspection are under its control too, plus reviewing company accounts and the Public Oversight Board.

Adding UKLA would put the FRC in charge of all company flotations and issues of bonds, and transfer ultimate responsibility from the Treasury to the Department of Business. Ministers have talked of producing a powerful new corporate supervisor and the Liberal Democrat trade minister, Ed Davey, admits the FRC could be better described as the Corporate Governance & Listing Authority.

The FRC has been beefed up this year with a new chairman – Lady Hogg, the former head of John Major's Downing Street policy unit – and chief executive, Stephen Haddrill from the ABI.

But opponents doubt the FRC's competence to make instant decisions and disagree with moving listing supervision from a financial regulator. They say primary issues – flotations – should not be split from subsequent dealings and warn of duplicated workloads.

They point out that of the 22,000 securities supervised by UKLA, only about 6,000 are shares in listed companies. Others are bonds including issues by sovereign wealth funds. Further, the FRC, unlike the CPMA, will have no representation on the new body formulating EU financial regulations.

Matthew Fell, the CBI's markets director, called the proposal an unwelcome distraction, saying: "It is not clear what the proposal to merge the UKLA with the FRC is seeking to achieve. UKLA is a real-time markets regulator whereas FRC is a standard-setting regulator."

Mr Rolet said: "UK regulation requires experience on a global scale, sophisticated real-time monitoring and response capabilities plus, crucially, the ability to fight our corner in Europe. The FRC would be unable to provide these requirements."

The IoD is also telling ministers that the FRC should not take on new tasks. Its director-general, Miles Templeman, said: "We do not think it makes sense to leave UKLA separate from the body responsible for the regulation and supervision of wholesale capital markets. There are clear synergies to be gained by keeping these two functions in the same organisation."