The Square Mile’s governing authority is throwing its weight behind new rules to attract the Saudi Aramco mega-float, pitting itself against other major bodies including the Institute of Directors (IoD) and the Investment Association, City A.M. can reveal.
The City of London Corporation has “no problem” with new listing rules put forward by the Financial Conduct Authority (FCA), which would boost the London Stock Exchange’s efforts to lure the $2 trillion-valued oil behemoth when it floats next year.
The FCA’s proposals, put forward in July and open to consultation until next month, would allow state-owned companies like Aramco to qualify for a premium listing on the London Stock Exchange with less onerous disclosure and regulatory rules.
Until now, public support for the rule changes has been limited, while the IoD, Investment Association and others have come out strongly against them.
However, the corporation’s policy chairman Catherine McGuinness told City A.M.: “Good corporate governance is one of the City’s real selling points in the global economy. We see no problem with adding a properly regulated and transparent category to the LSE’s already diverse range. This proposed category reflects the special nature of sovereign entities.
“Crucially no one would be forced to invest, while sophisticated market participants will be able to make their own judgments.”
A London Stock Exchange Group spokesman said:
Over many decades, the London market has achieved global leadership owing to our regulators' successful practice of periodically reviewing our regulatory framework to ensure that the principles of investor protection and high standards of governance are properly calibrated with economic realities.
Anything that enables UK markets to function well and in an orderly and internationally competitive manner, with both a high level of investor protection and meeting the demands of both issuers and global investors for a range of options to realise their capital raising and investment needs is welcome.
The proposals have divided the City and have led to calls for fresh political scrutiny amid opposition from financial services industry bodies and a number of fund management giants. City A.M. has learned that the newly formed Aberdeen Standard Investments is also opposed to the rule changes.
“Our market appears to have been made available to companies with no real business connection to the UK, with no apparent benefit to savers and investors in the UK,” Euan Stirling, the firm’s global head of stewardship, told City A.M. yesterday.
“I think it’s for the protection of the institution of the UK equity market that it is not made more volatile, and less attractive, by the inclusion of a huge, deeply cyclical, company.”
Last week, the chairs of the influential Treasury and Business, Energy and Industrial Strategy select committees, Nicky Morgan and Rachel Reeves, wrote to the FCA demanding further information on its proposals, including how much they were influenced by Aramco.
Chris Cummings, chief executive of fund management body the Investment Association, has warned that “removing key investor protections from the premium listed segment to accommodate sovereign-controlled companies” would remove necessary investor protections, and could impact on London’s reputation.
The Institute of Directors, meanwhile, is concerned the rules “do little to address the risks and challenges these companies pose, which include the potential for politically-motivated ownership interference over the company by the state apparatus and national governments undermining the rights of minority shareholders”.