Fresh hurdles in way of Saudi Aramco’s potential London listing

Pressure is now being piled up on London financial city watchdog over its plans to shake up listing rules aimed at paving the way for an Initial Public Offering by Saudi state oil company, Aramco. Two political heavyweights have cranked up the pressure on the London financial city watchdog over its plans to shake up listing rules which could pave the way for a Saudi Aramco mega-float.

The pressure is coming from two political heavyweights, the chairs of the influential treasury and business, energy and industrial strategy select committees, Nicky Morgan and Rachel Reeves, who have written to Financial Conduct Authority (FCA) boss Andrew Bailey demanding further information on the plans, including how far they have been influenced by Saudi Aramco.

The debate over the FCA rule changes, which would allow state-owned companies like the $2 trillion-valued Aramco to qualify for a premium listing with less onerous disclosure and regulatory rules, is dividing the City. While the London Stock Exchange is in favour of the changes, the Institute of Directors (IoD) and Investment Association have come out against them.

A Chartered Institute for Securities and Investment (CISI) survey of more than 200 financial services professionals has found a slight majority are opposed to the FCA proposals.

Some 36 per cent said the changes would send a message that the UK’s “morals are for sale”, while 18 per cent said they show “desperation because of recent political events”. Some 45 per cent said the rule changes were a good idea.

CISI chief executive Simon Culhane said he is “broadly supportive” of efforts to lure Aramco.

Making the letter to the FCA public today, Morgan warned that stock exchange listing rules for sovereign-controlled companies must not “dilute the protection afforded by the ‘premium listing’ brand”.

“The UK has a world-class reputation for upholding strong corporate governance,” she said. “The FCA must protect this reputation, especially as the City looks to remain competitive and thrive post-Brexit.”

Reeves added: “As we leave the European Union, it’s important the UK seizes new opportunities for business but it should not be at the expense of diminished corporate governance standards.”

The intervention, which comes ahead of the end of the FCA’s rule change consultation next month, was welcomed by the IoD.

“Nicky Morgan and Rachel Reeves are right to scrutinise the proposed changes to the listing rules for sovereign-controlled enterprises,” said Stephen Martin, director general of the IoD.

“We remain unconvinced by the FCA’s justification for these changes, and fear that they could undermine the credibility of the UK’s widely respected corporate governance framework.”

A London Stock Exchange Group spokesman said: “Providing discretionary access for investors to a broad range of UK and global companies is fundamental to the effectiveness and competitiveness of UK primary markets and to London’s role as the most international financial centre.”

An FCA spokesperson said: “The FCA can confirm it has received the letter and will respond in due course.”