City watchdog to soften rules in bid to woo Saudi Aramco listing
THE City watchdog is to push ahead with plans to soften UK listing rules for state-controlled companies as London races to win over oil giant Saudi Aramco, despite claims that the move risks damaging the market’s reputation.
The Financial Conduct Authority (FCA) has decided to create a new category especially for sovereign-controlled companies under its “premium” listing regime, despite investors and business groups raising concerns about the idea when it first emerged last year. The change comes as London fights with New York and Hong Kong for a slice of what is expected to be the world’s biggest ever stock market float, even though Saudi Aramco is only planning to sell 5pc of its shares.
The regulator said the new rules would bring “considerable benefit to investors” and would come into force in July. It did not mention the potential listing of Saudi Aramco.
The FCA’S move may have come too late, however, as recent reports have suggested the Saudi kingdom has cooled on the idea of a London listing, and could delay an initial public offering until next year. An IPO would raise up to $100bn (£75bn) for the country, although a recent surge in oil prices has potentially removed the urgency of a float. The FCA admitted that while its proposal had “split opinions”, many had acknowledged that the relationship between a company and a sovereign controlling shareholder is unique and so should be treated differently.
“These rules mean when a sovereign controlled company lists here, investors can benefit from the protections offered by a premium listing. This raises standards,” said Andrew Bailey, the FCA chief executive. “This package recognises that the previous regime did not always work.”
However, the decision angered those that have been lobbying against the move. Stephen Martin, the director general of the Institute of Directors, said the body was “deeply disappointed” by the move. “The FCA not only risks the market’s reputation with investors but the UK’S global reputation as a leader in best practice and good governance,” he said.
Chris Cummings, the chief executive of the Investment Association, which represents investors managing £7trillion of assets, said he expected the FCA to review the change in two years to check there had been no “unintended consequences”.