September 7, 2017 / 11:14 PM / in 10 months

Britain's FCA quizzed by lawmakers on listing rule plans ahead of Aramco IPO

LONDON (Reuters) - Britain’s financial regulator has been told by two parliamentary committees to address concerns that plans to relax rules on listing state companies could undermine corporate governance.

FILE PHOTO: Logo of Saudi Aramco is seen at the 20th Middle East Oil & Gas Show and Conference (MOES 2017) in Manama, Bahrain, March 7, 2017. REUTERS/Hamad I Mohammed/File Photo

The Financial Conduct Authority (FCA) in July proposed a new listing category for companies controlled by sovereign states, which was seen as a move to help London win the listing of Saudi Aramco as the oil giant prepares for what is expected to be the world’s largest ever initial public offering.

The proposal, however, has attracted the attention of Britain’s Treasury Select Committee and Energy and Industrial Strategy Committee, chaired by Nicky Morgan and Rachel Reeves respectively, who have written an open letter to FCA boss Andrew Bailey asking if the rules could weaken “protection for private investors against interference from foreign sovereign company owners”.

They asked the regulator to explain if Aramco’s interest in listing in London influenced the consultation and whether companies controlled by sovereign entities engaged in it.

The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. The Financial Services Authority (FSA) has been scrapped from April 1 amid reforms to fix a supervisory system criticised for failing to spot the financial crisis coming, forcing Britain to bail out banks. Two new bodies will replace it - the FCA and the Prudential Regulation Authority. REUTERS/Chris Helgren (BRITAIN - Tags: BUSINESS POLITICS LOGO) - GM1E9411OC101

Morgan and Reeves also asked if ministers and government officials had been consulted on the balance between attracting foreign investment and maintaining the integrity of Britain’s stock market.

The FCA said it has received the letter and will respond in due course.

The FCA’s proposals were applauded by Britain’s financial lobby groups as helping to ensure the country’s capital markets remain attractive once it leaves the European Union.

But they have received a cold reception from investors and corporate governance groups that say the proposed new listing category could lower the quality of companies on the London stock market and leave shareholders with less protection when things go wrong.

Aramco has yet to decide where it will list, though London and New York have been touted as frontrunners for the bulk of the public flotation.

Reporting by Clara Denina; Additional reporting by Huw Jones; Editing by David Goodman

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