LONDON — Senior politicians demanded answers from the UK’s top markets regulator about proposed changes to stock market rules, ahead of one of the biggest potential share listings ever.
The letter seeks answers about the FCA’s proposal to make it easier for sovereign-owned companies to list on the UK market, which has been widely seen as an attempt to attract a listing of Saudi Aramco, Saudi Arabia’s state oil giant, by relaxing existing rules.
Nicky Morgan, who heads up the influential Treasury Select Committee and Rachel Reeves, who leads the Business, Energy and Industrial Strategy Committee wrote to Andrew Bailey, Chief Executive of the Financial Conduct Authority about the changes.
“The UK has a world-class reputation for upholding strong corporate governance,” said Morgan. “The FCA must protect this reputation, especially as the City looks to remain competitive and thrive post-Brexit.”
Reeves said the FCA’s consultation “raises questions” about the UK’s reputation, and said seizing new opportunities in the wake of Brexit “should not be at the expense of diminished corporate governance standards.”
In July, the regulator proposed relaxing the rules certain sovereign-owned companies must fulfil before they can be listen on the London Stock Exchange. The proposed change would create a new category “within its premium listing regime” for sovereign-owned companies, which would also include fewer regulations about how a company can behave, including whether investors vote on independent directors.
In August, the Institute of Directors warned the proposed changes could be interpreted as an “opportunistic attempt at boosting short-term primary issuance,” while threatening London’s reputation as a centre for corporate governance in the long-term.
The letter to Bailey questions the rationale for the consultation, “given the concerns expressed by stakeholders that these proposals would weaken protection for private investors against interference from foreign sovereign company owners.”
Saudi Aramco is valued at around $US2 trillion, and is planning to sell around 5% of its shares. It is expected to float in late 2018, in either London or New York.
The FCA’s consultation closes on 13th October.