The financial regulator plans to relax rules for sovereign companies wanting to list on the London Stock Exchange, paving the way for Saudi Aramco’s £1.5tn float.
After a period of consultation following some opposition, the Financial Conduct Authority (FCA) said from July 1 its “premium” listing plans to exempt state-owned entities from rules that apply to privately-held companies.
Andrew Bailey, FCA chief executive, said: “These rules mean when a sovereign controlled company lists here, investors can benefit from the protections offered by a premium listing.
“This raises standards. This package recognises that the previous regime did not always work for these companies or their investors. These rules encourage more companies to adopt the UK’s high governance standards.”
The new rule means state-owned companies, like Saudi Aramco, will no longer have to operate at arms length from its biggest investor.
Saudi Aramco is considering floating 5% of its shares, possibly in London, Hong Kong or New York, in addition to a listing in Riyadh.
Its all part of Saudi Arabia’s crown prince Mohammed bin Salman’s plan to open up the economy to international investors.
But the FCA’s plans have met resistance from industry groups including the Institue of Directors (IoD).
“The IoD is deeply disappointed that the FCA has decided to press ahead with the creation of a new premium listing category which reduces key corporate governance requirements,” the IoD’s director general Stephen Martin said in a statement.
“This decision has been made despite opposition from across the governance spectrum and without providing evidence as to the necessity for the reduction in standards”
He added: “While we recognise that the regulator has taken on board some of the IoD’s concerns in relation to the election of independent directors, they do not go far enough.
“The IoD reiterates its recommendation that the appointment of independent directors should be ratified by a binding vote of independent shareholders, as well as by the vote of the shareholder constituency as a whole.
“The FCA fails to provide a convincing justification for why listing rules relating to premium category issuers should be waived or removed in cases where the issuer has a controlling sovereign shareholder.
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“If anything, we believe that listing rules should be strengthened for this category of issuer given its distinctive governance challenges and risks.”
Aramco has yet to decide when and where it plans to float.