Britain's FCA goes ahead with disputed 'Aramco' listing rule

LONDON (Reuters) - Britain’s markets watchdog will press ahead with a new premium listing next month aimed at attracting companies like state-controlled Saudi Aramco to London, although the rules have been “refined” following investor criticism.

FILE PHOTO: The logo of Saudi Aramco is seen at Aramco headquarters in Dhahran, Saudi Arabia May 23, 2018. Picture taken May 23, 2018. REUTERS/Ahmed Jadallah

The Financial Conduct Authority’s initial proposal last year led to suggestions the British government had influenced the watchdog to try to secure the Saudi energy company’s planned initial public offering (IPO).

Saudi Arabia is expected to float up to 5 percent of Aramco in Riyadh and an international venue such as London or New York in what is expected to be the biggest ever IPO and would boost the reputation of its chosen listing venue.

Saudi Aramco had no immediate comment.

The City of London and TheCityUK which promote Britain as a business center, welcomed the new rule as long as strong corporate governance standards are maintained.

Britain is keen to promote London’s leading position as a financial center as it leaves the European Union but some lawmakers had questioned if the original proposal for listings by sovereign-controlled firms could weaken investor protection.

The FCA said it was pressing ahead, despite criticism of its plans by major institutional investors when they were first circulated in July last year.

“The FCA thinks there is considerable benefit to investors if corporate issuers agree to meet these additional premium requirements,” the watchdog said in a statement accompanying an 83-page document outlining the new rules on Friday.

The FCA said it had made some changes following feedback, including the requirement that the election of independent directors be subject to approval from independent shareholders.

There would also be a requirement for “timely disclosures” on transactions between the sovereign and the issuer.

But there will not be a requirement for a controlling shareholder agreement, and no need for an advance sponsor opinion or advance approval by independent shareholders of certain transactions with the sovereign or its associates.

“These rules mean when a sovereign controlled company lists here, investors can benefit from the protections offered by a premium listing,” FCA Chief Executive Andrew Bailey said.