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FCA clears path for Saudi giant Aramco's London listing

The City regulator has proposed creating a new form of London listing for sovereign-backed enterprises.

 
FCA clears path for Saudi giant Aramco's London listing
 

The City regulator has proposed creating a new form of listing for sovereign-backed enterprises publicly traded in London, allowing Saudi Arabian titan Aramco to enter the main exchange.

The Financial Conduct Authority (FCA) has today launched a consultation on the proposed rule change, which would ease rules preventing a single holder from dominating the shareholder register, and on rules governing shareholders considered to be related parties.

In addition to straightforward equity, the FCA would also allow depositary receipts to be traded as a senior FTSE listing.

A Saudi Arabian proposal to list 5% of state oil company Aramco - which may be worth as much as an estimated £1.5 trillion - caused much excitement in parts of the City earlier this year and would be seen as a political coup for the UK, as Brexit raises questions about London’s status as a financial hub.

The proposal would contravene current rules which dictate that at least 25% of shares in a business must be in public hands to trade on the senior exchange, however.

Fund manager trade body the Investment Association last month issued a strong defence of the rule. Chief executive Chris Cummings said the constraint should apply ‘irrespective of the size of the company being listed’ and ‘should be preserved at all costs to protect the integrity and standard of the UK premium listing’.

FCA boss Andrew Bailey said a new class of share would allow investors to consider sovereign-backed issuers on their own terms while preserving the historical protections for most buyers.

‘Regulatory protections for investors lie at the core of the listing regime,’ he said.

‘However, it is important that these protections remain well-targeted. Refining the listing regime in this way would make UK markets more accessible whilst ensuring that the protections afforded by our premium listing regime are focused and proportionate.

‘Sovereign owners are different from private sector individuals or companies – both in their motivations and in their nature. Investors have long recognised this and capital markets are well adapted to assess the treatment of other investors by sovereign countries.’

Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said it looked like the FCA was amending the listing rules to suit one company, which is not an effective way to regulate the overall market.

'If the proposals in this consultation document are implemented, it will be bad news for London and will reverse the progress we have made in recent years to uphold strong governance and protect minority shareholders,' she said.

2 comments so far. Why not have your say?

Keith Cobby

Jul 13, 2017 at 14:42

Rules are rules until the 800 pound gorilla comes along!

report this

JohnR

Jul 14, 2017 at 12:11

If it helps us sell more bombs what harm can it do..

report this

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