FSA Issues Suspension Warning
December 23, 2008, Financial Director

Recently, New Star Asset Management publicly announced its request to have its shares suspended from trading had been denied by the UK Financial Services Authority (FSA).

Andrew Caunt, a partner in the Capital Markets Practice at White & Case in London, says that the FSA "rarely" suspends shares from trading.. "It is even rarer for a company to reveal that it has applied for its shares to be suspended and even rarer for it then to publicly disclose that its request was turned down."

Caunt says "no one is really sure why New Star made the announcement – it is such an unusual step. Investors always want a company's shares to be traded, even if they hold stock in a rapidly falling share price. To suspend shares just adds to market uncertainty and is not a remedy the FSA wants to promote."

"It is abundantly clear, therefore," says Caunt, "that the FSA will not merely suspend a company's shares that are in freefall simply because the company wants it to. The reasoning needs to satisfy the FSA that it is in the interests of investors – not directors. The regulator is reminding companies that it is not going to step in and pull the plug on trading if their share prices are tumbling. The FSA is there to preserve market integrity, and so long as companies can meet the criteria of keeping investors informed with up-to-date financial data, trading is going to continue."

"Just because you're going through a difficult time and are negotiating with bankers, it doesn't mean you should have your shares suspended," he added. "The FSA is very clear it won't suspend shares just to help a company fix its share price. There needs to be a reason that shows the smooth operating of the market is being jeopardized."