Top Legislators Question FCA Over Aramco Listing Rules

The chairs of two UK parliament committees have approached the Financial Services Authority over a proposal to relax LSE listing rules in a bid to win the business of Saudi Arabia when it floats Aramco next year.

Nicky Morgan, chair of the Treasury Select Committee, and Rachel Reeves, head of the Energy and Industrial Strategy Committee, wrote to the watchdog with a number of questions regarding whether FCA’s proposal for a consultation to look into a change of listing rules was in any way motivated by interest expressed by Aramco’s management in floating 5 percent on the London Stock Exchange.

The FCA announced the idea of changing the rules for Aramco in July. FCA’s proposal essentially comes down to creating a new category within its rules for premium listings, “to cater for companies controlled by a shareholder that is a sovereign country.” The aim is to convince Aramco to go for the premium, rather than the standard, listing. This, however, goes against current rules that require any business opting for the premium listing to float at least 25 percent of its stock.

The proposal drew criticism from corporate governance bodies, including the Institute of Directors, which last month came out with a press release saying the market watchdog’s proposal did “little to address the risks and challenges surrounding sovereign-controlled companies which include the potential for politically-motivated ownership interference over the company by the state apparatus. National governments are also in a strong position to undermine the rights of minority shareholders and the authority of the Board of Directors at such enterprises.”

Aramco’s IPO is vital for the Vision 2030 economic transformation program initiated by the Crown Prince of Saudi Arabia, Mohammed. The company has been valued at over US$1 trillion by Riyadh, although external valuations are substantially below this figure.

By Irina Slav for Oilprice.com

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