FCA proposes to clear the way for London Saudi Aramco listing with new rules

Courtney Goldsmith
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Saudi Aramco is said to be worth $2 trillion (Source: Getty)

The UK's financial watchdog has proposed new rules to make it easier for sovereign state-owned companies like oil giant Saudi Aramco to list their shares in London.

The Financial Conduct Authority (FCA) today launched a consultation on a new premium listing category that will exempt certain companies from rules on related party transactions and controlling shareholders.

The aim of the proposals is to make UK markets more accessible, said FCA boss Andrew Bailey.

London has lobbied to win the initial public offering (IPO) of Aramco, the Saudi state-owned oil giant which is said to be worth about $2 trillion (£1.5 trillion). Aramco wants to sell just five per cent of its total share capital in what is expected to be the world's largest float.

Concerns voiced over changes

However, some fund managers have expressed concern over bending the rules for Aramco.

Nicholas Holmes, equity capital markets partner at law firm Ashurst, said:

The declared basis of the proposed dilution of the regime... is the claim that sovereign owners have different motivations from private sector individuals or companies.

This may be true, but it is not necessarily the case that these motivations are any less in need of proper control and scrutiny. The risk is a dilution of the premium listing brand.

Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said it will be "bad news" for London if the proposals are put in place.

“It looks like the FCA is consulting on amending the existing listing rules to accommodate the peculiarities of one company, which is not a very effective strategy for regulating the market as a whole. 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."

Read more: London fund managers soften on Saudi Aramco float ahead of new FCA paper

Keep the UK internationally competitive

Others say the changes reinforce London's position as a global market.

"London has always been a global market...The FCA’s proposal to create a separate international segment reinforces this commitment, particularly with Brexit coming down the tracks," said Raj Karia, head of corporate, M&A and securities for Europe, Middle East and Asia at law firm Norton Rose Fulbright.

A spokesperson for the London Stock Exchange Group said:

We support initiatives that enable UK markets to function well and in an orderly and internationally competitive manner.

Providing discretionary access for investors to a broad range of UK and global companies is fundamental to the effectiveness and competitiveness of UK Primary Markets and to London’s role as the most international financial centre.

Chris Woods, managing director of governance, risk and compliance at FTSE Russell, noted that, if implemented, the proposals would not change the eligibility criteria for inclusion in the FTSE UK Index Series, including the FTSE 100.

Meanwhile, TheCityUK, the industry body for UK financial services firms, supported the FCA's shake-up, which it said showed an "open-minded approach to regulatory change".

Chris Cummings, the boss of the Investment Association, added that it is "vitally important" London maintains a good flow of high quality and well-run businesses from across the world coming to list on the London market.

Bailey said regulatory protections for investors are at the core of the listing regime.

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.

The FCA said discussions on the review will continue, and it will release more detailed proposals in due course.

Read more: London Stock Exchange boss joins PM in Saudi Arabia as he seeks Aramco IPO

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