A prominent investor group has strongly objected to controversial plans to allow sovereign companies such as Saudi Aramco lower transparency requirements to list in London, with a consultation by the City watchdog closing tomorrow.
Under the plans put forward in July by the Financial Conduct Authority (FCA), state-owned companies such as Aramco will qualify for a so-called premium listing on the London Stock Exchange, with less onerous disclosure and reporting rules.
The International Corporate Governance Network (ICGN) said the plans were “fundamentally flawed”, saying the UK should be pursuing a “race to the top” as it seeks to stand out rather than loosening regulation.
“We object to the watered down governance provisions which increase risk and the ‘premium’ labelling, which we believe is misleading”, the ICGN said.
Attracting Aramco to the UK rather than New York would be a major coup for the London Stock Exchange. The Saudi government is aiming for a valuation of $2 trillion for the oil behemoth's part flotation, potentially making it the most valuable listed company in the world.
However, the ICGN’s objections add another weighty voice against the plans, designed to attract Aramco. The group represents investors with assets under management of more than $26 trillion (£20 trillion), including Aviva Investors, Blackrock and Fidelity among its who’s who of institutional members.
The consultation has already drawn a wide range of responses from corporate governance groups, business lobbyists and politicians, with opinions split as to how welcoming British regulators should be to sovereign listings.
Last month the City of London Corporation threw its weight behind the plans, arguing that a properly regulated new category could boost the Square Mile.
However, other industry groups including the Institute of Directors and the Investment Association have raised significant issues with the proposal, saying it would harm the UK’s world-leading reputation for institutional integrity.
“The UK’s reputation for high-quality listing and governance standards is both a competitive advantage and a positive differentiator for the UK market in a global context,” the ICGN said.
“In the quest to grow and develop further, market integrity is something that must be preserved , and not diluted.”
The FCA will now assess the evidence, with an announcement at an as-yet-unknown point on either a change of policy or further consultation.
The consultation is part of a wider FCA effort to look at the role of the UK’s listed primary markets in capital markets.