FCA proposes amendment for sovereign-controlled companies

SAUDI-OIL-ARAMCO

SAUDI-OIL-ARAMCO

London has lobbied to win the initial public offering (IPO) of Aramco, the Saudi state-owned oil giant which is said to be worth about $2 trillion (£1.5 trillion).

Under the changes, sovereign firms would be able to list under a new category within the premium listing rules that would allow companies to list depositary receipts instead of stock.

The FCA's decision to propose the new rules comes even as a number of bodies representing the largest investment institutions in Britain have publicly voiced their opposition to relaxing investor protection rules to accommodate sovereign share-sellers such as Saudi Arabia.

A listing in the City would be seen as a major victory for the City especially as it faces the threat of losing parts of its business to the continent thanks to Brexit. The FCA also wants to absolve those controlling shareholders from rules that apply to their transactions with the listed company in the present listing regime.

The plan has provoked criticism from some institutional investors who fear that accommodating Aramco will water down standards in London.

There are concerns that such a small percentage placing could leave investors holding a stock that is relatively illiquid - that is, one that may be hard to sell.

"Regulatory protections for investors lie at the core of the listing regime", Andrew Bailey, the FCA chief executive, said when announcing the new proposal.

"Refining the listing regime in this way would make United Kingdom markets more accessible whilst ensuring that the protections afforded by our premium listing regime are focused and proportionate", FCA chief executive Andrew Bailey said on Thursday.

"Sovereign owners tend to be different from private sector individuals or entities in both their motivations and their nature", it said in its consultation paper. "However, it is important that these protections remain well-targeted", Bailey said.

The changes are likely to make London more attractive to state-controlled companies as several Gulf countries, including Oman and Abu Dhabi, are considering listing oil assets.

The review the FCA began with the DP17/2 discussion will continue, and in due course we will be summarising, in one or more documents, the feedback we have received from stakeholders together with more detailed proposals for reforms, should we consider those desirable.

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