The leaders of two U.K. parliamentary committees have
written to the Financial Conduct Authority to ask if it has
been pressured to write new rules to accommodate a stock market
listing for Saudi Aramco.
The move comes after the U.K.s market regulator
published a consultation paper in July focused on
making the listing regime work better for companies
controlled by a shareholder that is a sovereign country
and proposing to change the current rules to accommodate a new
category where reporting standards may not be as stringent as
with the existing categories. Institutional investors and
business leaders have decried such proposals, which they say
could hamper corporate governance standards.
A U.K. listing of Saudi Aramco would be a coup for the
London Stock Exchange, as it would inflate trading volumes
overnight and could set the path for other listings from
sovereign-owned entities from the Middle East. Hong Kong and
New York also have been reported by media outlets as potential
exchanges where Aramco could list.
[II Deep Dive: Inside the Fight Over Saudi Aramco]
Despite the competition, Nicky Morgan, chair of the
parliamentary Treasury Select Committee, and Rachel Reeves,
chair of the Business, Energy and Industrial Strategy
Committee, expressed concerns in a letter to Andrew Bailey,
chief executive of the FCA, according to a joint media
Mrs. Reeves said in the release that the consultation raised
questions about the U.K.s reputation for sound corporate
governance, adding that while it is important for the U.K. to
identify new business opportunities when it leaves the European
Union, it should not be at the expense of diminished
corporate governance standards, adding, Getting
this balance right will be vital to the U.K.s long-term
future as a key financial centre and an attractive market-place
place for investors.
The legislators pressed Bailey for answers on several
questions, including whether the FCA knew Saudi Aramco was
interested in obtaining a listing and if so, how far that
interest influenced the consultation.
Nicky Morgan, chair of the Treasury Select Committee, said
that the issues raised in the FCA consultation document would
likely be examined by the Treasury Committee. The U.K.
has a world-class reputation for upholding strong corporate
governance, she stated in the release. The FCA must
protect this reputation, especially as the City looks to remain
competitive and thrive post-Brexit. Any changes mustnt
dilute the protection afforded by the premium
The remarks follow strenuous objections from the U.K.
investor community, which remains widely opposed to the new
changes. Last month, the Institute of Directors one of
the largest trade groups in the U.K. said any changes
could lead to weaker standards and governance problems.Other
firms to have publicly criticized the proposed changes include
Aviva Investors, Hermes Investment Management, Royal London
Asset Management, and Schroders.
A spokesman for the Financial Conduct Authority
confirmed to Institutional Investor that the regulator had
received the letter, adding, We will respond in due
course. Saudi Aramco did not respond to a request for
comment at the time of publication.