The UK´s Financial Conduct Authority (FCA) has come under fire over its plans to relax governance restrictions for state-owned companies listing on the London stock exchange.
Controversial proposals to tone down London´s listing rules could make it more likely that oil giant Saudi Aramco will choose London over New York for its forthcoming IPO.
The FCA yesterday revealed plans to create a new category for state-owned firms that want to launch IPOs in London. It is part of wider measures being contemplated by the regulator as it seeks to maintain the attractiveness of London post-Brexit.
It means that sovereign controlled firms such as oil giant Saudi Aramco could face a lower threshold of regulation than those firms controlled by private entities and individuals.
However, some investors fear the UK will only damage its global reputation if it weakens governance to entice such foreign state-owned giants to its shores.
ShareAction said investors had good reason to be “nervous” about any dilution of existing safeguards that had been specifically introduced to avoid a repetition of the governance issues that blighted the former London-listed miners BUMI and ENRC.
“The FTSE 100 includes a range of multinational businesses who meet high governance standards – there is no reason why this should be diluted by technical changes in the premium listing with potential implications for passive investors," said ShareAction chief executive Catherine Howarth.
Aramco is soon expected to choose between London or New York for its IPO, making the FCA´s intervention in this regard especially timely.
Among the implications of the proposed rule changes is that Saudi Arabia would not be treated as a “related party,” and would therefore not be required to secure approval from shareholders for a transaction between itself and Aramco. The would include investments in other state-owned assets.
As the largest oil company in the world, Aramco´s IPO is expected to value the company at $2tn. Saudi Arabia plans a domestic listing for Aramco and at least one other on a foreign stock exchange in 2018.