Although not the traditional choice for the post at the Financial Services Authority, Ken Rushton has had nothing but support from the business and reporting community, bankers and brokers since he became head of the UK Listing Authority in August 2001.
However, this support is not limitless. Rushton admits that maybe ‘people are waiting to see which direction we move in, particularly in the way we review the regime’.
But Rushton, 56, is no stranger to company regulation. Immediately prior to taking up his post at the FSA, he was director of the Institute of Business Ethics, a charity that advises companies on corporate responsibility.
And before that, for three years he was company secretary at ICI, beginning in 1996, and previously sat on the London Stock Exchange’s listing committee.
Experience serving Rushton well
It amounts to a breadth of experience that is serving him well in his new job. ‘As far as culture changes go, the differences are less than I expected. The senior management here in terms of style and personality are very similar to what I’ve been accustomed to.’
Still it seems you can teach an old dog new tricks and Rushton does not underestimate the huge learning curve he is experiencing. ‘It’s lovely to be in a job where at my age you’re still having to go back to school. But I don’t think it’s a huge gamble (taking me on),’ he says.
But as with any job there seems to be a downside. In his case, it is bureaucracy.
The Financial Services Authority which now controls the LSE, is the UK’s main watchdog, overseeing the work of 11,000 organisations. As its power and influence has increased so has its reach – resulting in necessarily tight controls. These however, can hamper efforts to move forward.
‘I sounded off a bit about bureaucracy. One has to learn to deal with that but it can be very frustrating and I’ve got a lot to learn about managing the process,’ admits Rushton.
However he acknowledges that ‘there should be internal and external checks and balances considering the power the FSA has’.
No special sympathies
Given his background on the ‘other side of the fence’, Rushton denies he will be ‘bending over backwards to always be kind and sympathetic of the business point of view’.
But, he says that his experience will undoubtedly help in his new role.
‘I can look at things in a more rounded way but I’m not coming to it totally naive,’ he assures.
Indeed, he is determined to improve disclosure to the market. ‘Companies have a responsibility to inform the market if there are changes to financial predictions. And that wasn’t happening,’ says Rushton.
So on 28 September, 2001, the Listings Authority put out a general reminder to companies about their obligations to disclose price sensitive information.
It was a success. Immediately after the notice was published, the number of trading updates went up from seven or eight a week to between 30 to 35 a week. The FSA’s risk-based strategy was designed to shift the focus of the financial regulator to large organisations which pose the greatest threat to the FSA’s core goals of preventing crime, protecting consumers, maintaining confidence and improving consumer understanding.
According to the authority, 80% of the firms under its control would have little impact on its targets if they were to run into trouble, and by not subjecting them to regular visits, it will have the resources to tackle organisations where the risk of failure is high and where they will have most impact.
The big players approach
This approach to target the big players will be phased in slowly throughout the year.
To ensure good communication and broad consultation Rushton has, however, already taken the step of including more business people on his advisory committee – a move that was greatly welcomed by the business community.
Rushton has now been in his job for seven months and this is where things start moving for him. ‘The initial reaction is that people are prepared to give me the benefit of the doubt,’ he adds.
But for how much longer? Rushton and his team will next month embark on an 18-month long comprehensive review of the UK’s listing rules. This follows on from a study carried out in other countries.
Rushton enlisted partners from Big Five firm PricewaterhouseCoopers to carry out a comparative examination of seven listing regimes, including the US, Hong Kong, Australia and four European regimes.
Not just looking at desktops
The review has not just looked at desktop systems, but conducted comprehensive interviews with regulators, market practitioners and ‘at my insistence’ with companies, too. The aim of the study was to identify a number of topics that will be explored in the review of the listing rules.
The study, which has many implications for accountants because it plans to consider auditor rotation and disclosures, will be conducted in a similar way to that of the three-year-long company law review.
Rushton is to set up a project board including divisional directors to be chaired by Michael Foot, FSA managing director. Under the aegis of the project board there will be a consultancy committee that will be an expanded version of the Listing Authority’s advisory committee.
This will include a number of accountants and lawyers, which Rushton considers to ensure the perfect blend for progress. Although he points out that unlike the listing rules in the US, UK listing rules are not accountancy based.
Rushton continually reiterates the review will not be a ‘blitz’ nor is it starting from the ‘assumption that everything is wrong and bad at the moment’. ‘But, I’m always looking for ways to improve (our regime)’.
But his task will be pitted with obstacles.
Unfortunately it is not just FSA bureaucracy that is frustrating Rushton.
He says there are huge constraints on what he can currently do due to consultation processes in Brussels.
European Commissioners are striving to create a single market to rival the US market. One of the building blocks for creating that goal is the prospectus directive, which proposes to harmonise all listing standards across European member states.
Lamenting the process
Rushton acknowledges the objective but laments the process and possible outcome. ‘It’s a plausible, sensible objective but getting there is more difficult than it sounds because we all start from very different points.
And I would argue that there is a far higher level of market confidence in the UK regime than in other regimes,’ he says.
‘There may be legal statutory limits coming out of Europe as to how far we are able to go in maintaining that competitive edge.’
Member states hope to reach a common position by mid-year. In the meantime, Rushton has to contend with these external pressures. ‘There is pressure from the Treasury to get on with the review,’ he says, ‘I want to get on with it. I’m impatient by nature.’
No plans for quarterly reporting
He refutes reports last year that he plans to impose quarterly reporting on the UK’s public companies.
‘Pressure for quarterly reporting is coming out of Brussels again. I think it’s fair to say that in Brussels what they tend to do is look to the American market as being the lead and if it’s good enough for the US then it’s good enough for Europe,’ he explains.
However he admits that he expected ‘far stronger opposition’ to the proposal.
Corporate UK will have to adopt the laissez-faire approach until the review is completed towards the end of 2003. But they can count on Rushton’s inclusive approach and determination to avoid watering down the UK’s competitive edge.
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