The Financial Conduct Authority today mounted a defence of its role in the botched charm offensive on British chipmaker Arm after the firm revealed it would shun a London listing in favour of New York last week.
Arm and its Japanese owner Softbank had been the subject of a major campaign by UK ministers and regulatory officials over the past 12 months, with Boris Johnson and Rishi Sunak both throwing their weight behind the efforts when prime minister.
However, the Cambridge-based chipmaker announced last week it would opt for a New York-only listing in its much-anticipated IPO later.
Onerous reporting rules required by the FCA were one of the reasons for the firm’s decision to float on New York’s Nasdaq exchange, the Financial Times reported this week.
However, speaking with the Treasury Select Committee today, FCA chief executive Nikhil Rathi said the watchdog had looked to tweak its rules to accommodate the firm and there were more deep-rooted reasons for Arm’s decision to head for New York.
“In the case of Arm, we were aware and the government indicated to us that this was a company of national importance,” Rathi told MPs. “And therefore we engaged to look at our rules where there was a case for making modifications and where that evidence was presented to us.”
While he declined to go into specifics, Rathi told MPs “you can rest assured that we are very engaged on these issues.”
He added that the decision of Arm, which was listed in London until 2016, presented a “wider question” for the country in how much “we are prioritising the development of our capital markets in broader public policy”.
“When Arm was taken over by Softbank in 2016, the takeover panel applied certain conditions… [but] retention of a capital market nexus in the UK was not one of the conditions,” he added.
Such a condition would have allowed the UK powers to mandate Arm float in London if it returned to the public markets, with Rathi saying similar powers had been exercised in markets like Australia.
The decision by Arm has struck a major blow to the UK’s ambitions to boost its capital markets on the international stage and has fuelled fears of an exodus overseas.
Concerns have been further stoked by the decision of building supplier CRH to switch its London listing for New York last week, as well as the announcement that data firm WANdisco was in the early stages of scoping out a dual listing in New York.