UK shouldn’t start a ‘regulatory race to the bottom’ to lure Arm into London float, top City group warns
A top City lobby group has hit out at the UK’s financial watchdog over claims it is planning to bend its own rules to persuade microchip designer Arm to float on the London Stock Exchange.
The Institute of Directors (IoD) warned the Financial Conduct Authority’s (FCA’s) offer to waive market rules “undermines the integrity of both the rules themselves and the UK’s wider governance framework.”
The IoD’s comments follow a report in The Sunday Times that the City watchdog is planning to lift rules to lure the Cambridge semiconductor firm into listing in London instead of New York.
FCA officials have reportedly said they would be prepared to relax the regulator’s requirements around ‘related party transactions’ that force listed firms to make declarations on dealings with connected entities.
Arm has expressed concerns the rules would require it to report on any dealings with its parent company Softbank or any of the Japanese conglomerate’s hundreds of subsidiaries.
The rules, which are intended to reduce the risk of secret conflicts of interest, could also require that Arm consult shareholders in dealings with Softbank and other firms.
The UK’s longest-running professional organisation for company directors said the plans show a “worrying willingness to rewrite the listings rulebook as a means of luring business to London”.
Roger Barker, director of policy and corporate governance at the IoD, warned “there is a real danger in watering down established governance rules in order to win specific transactions.”
“In the long term, good corporate governance is best served by the consistent and fair application of sensible listing rules that protect investors and other stakeholders,” Barker said.
“The UK should not endanger its hard-won reputation for high governance standards by engaging in a regulatory race to the bottom,” the IoD exec added.
First founded as a joint venture between Acorn Computers, Apple, and VLSI Technology in 1990, the Cambridge firm designs the microchips used in 95 per cent of all smartphones.
Prime minister Rishi Sunak has sought to woo Arm into listing in London despite Softbank chief Masayoshi Son’s public statements in favour of a New York float.
Arm, one of Britain’s largest and most strategically important companies, first listed on the LSE in 1998 before being acquired by Softbank for £24bn in 2016.
Softbank later sought to sell the former FTSE 100 firm to US tech giant Nvidia in September 2020, before the proposed deal collapsed in 2022.
The FCA declined to comment on the report, while Arm was approached by City A.M. for comment.
The FCA’s offer is believed to be the first of its kind since the regulator sought to lure Saudi Aramco into launching its IPO in London in 2017.
The offer saw Saudi Arabia’s state-owned oil giant presented with an opportunity to list just five per cent of its shares on the LSE, rather than the normally required 25 per cent.
The Aramco offer created a backlash from critics who claimed giving out such a deal would undermine Britain’s corporate governance rules.