UK financial watchdog admits to meeting Aramco ahead of proposing listing changes

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The FCA in July proposed the new listing category in a move seen as helping London to court the initial public offering of Aramco

London has denied the rule change will be made for Aramco specifically (AFP)
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Friday 13 October 2017 12:05 UTC
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The head of the UK's financial watchdog admitted that he met with Saudi Aramco early this year before the regulator published its proposals for new listing rules in July.

The Financial Conduct Authority (FCA) in July proposed the new listing category in a move seen as helping London to court the initial public offering of Aramco, which is likely to be the largest ever initial public offering (IPO). 

The oil giant is also looking at rival financial centre New York.

'We can confirm that we held conversations with Saudi Aramco and their advisers in light of their interest in a possible UK listing in the early part of this year'

- Andrew Bailey, head of FCA

The watchdog has not issued any final rules, but members of parliament and Britain’s leading trade body for the investment industry worry the proposed changes would not give investors enough protection.

The acknowledgement came as two parliamentary select committees wrote to the FCA to demand answers about the level of government influence over the proposals,

“We can confirm that we held conversations with Saudi Aramco and their advisers in light of their interest in a possible UK listing in the early part of this year," the Financial Times reported Andrew Bailey, the head of the FCA as writing in a letter published on Friday to parliament's treasury and business, energy and industrial strategy committees.

"We emphasised during those conversations that we were reviewing the listing regime,” said Bailey. 

The announcement came after UK Prime Minister Theresa May and the head of the London Stock Exchange, Xavier Rolet, travelled to Saudi Arabia to press for London as the venue for Saudi Aramco’s planned IPO.

In line with government policy

Meanwhile, the FCA said on Friday that its proposals for listing state-controlled companies such as Saudi Aramco were in line with Britain’s aim of London remaining a leading financial centre, raising concerns about whether they were robust enough.

In a letter to parliament’s treasury and business committees, FCA chief executive Andrew Bailey said the proposals were consistent with the finance ministry’s recommendations to the watchdog in March.

“The recommendations include the point that London retaining its position as the leading international financial centre supports the aim of sustainable economic growth,” Bailey said.

“Those recommendations had been discussed with Treasury.”

Bailey said he has had no conversations with ministers about plans to reform the listing rules.

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UK bends rules to allow London listing of Saudi oil giant Aramco

“However, given the public discussion of these events, we can confirm that we held conversations with Saudi Aramco and their advisors in light of their interest in a possible UK listing in the early part of this year,” Bailey said.

“We emphasised during those conversations that we were reviewing the Listing Regime.”

Committee chair Nicky Morgan said on Friday that questions remain about the level of political involvement in the consultation.

“The UK’s world-class reputation for upholding strong corporate governance mustn’t be watered down,” Morgan said in a statement.

Separately on Friday, Royal London Asset Management, with over £20bn invested in Britain’s stock market, said the new listing category is problematic and unnecessary.

“While we fully support the case that the UK must stay competitive in a growing global marketplace, we do not think re-writing the rules is the correct way to go about it,” its corporate governance manager Ashley Hamilton Claxton said.

Bailey said in his letter that protections for investors will not be weakened under the proposals. He is due to appear before the treasury select committee later this month in a regular hearing in parliament.