Seniorpoliticians on Friday warned the City watchdog against “watering down” standards to woo Saudi oil giant Aramco’s $2 trillion float to London.
Treasury Select Committee (TSC) chairman Nicky Morgan and her Business Energy and Industry counterpart, Rachel Reeves, said there were questions to be answered over the “political involvement” in the Financial Conduct Authority’s proposals to create a new premium listing category for sovereign companies like Saudi Aramco choosing London.
Attracting Aramco to the Square Mile would be a huge coup for post-Brexit London. But investor concerns have been raised by the FCA scrapping rules on related-party transactions governing dealings between the sovereign shareholder and the company — potentially exposing independent investors if major assets are bought or sold by the government, for example.
The watchdog has also proposed weakening “controlling shareholder” rules giving minority shareholders a bigger say over appointing independent directors.
Morgan (pictured) and Reeves wrote to FCA boss Andrew Bailey last month probing how far Aramco’s interest in a possible float “influenced the consultation”.
Bailey insisted today that he had had “no conversations with ministers on the subject” although he admitted the FCA emphasised it was considering a change in the rules in a meeting with Aramco and its advisers in the early part of this year.
The Treasury was first informed of the consultation in March, he added. Sources insist the watchdog was planning the mooted changes before Aramco’s interest emerged.
Morgan has hauled Bailey and chairman John Griffith-Jones before the TSC for a grilling on the rule changes this month. She said: “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. What may well be good for City traders is not necessarily good for the rest of the country’s economy or investors.
“It is not at all clear how taking these steps will boost jobs, investment or returns to investors in the UK and I look forward to examining the FCA’s proposals once their consultation has concluded.”
Aramco plans to float 5% of the business, with the City vying with New York. The vast size of the firm, which pumps more than one in 10 barrels of the world’s oil, means it is big enough to warrant a rare waiver of the rules on a 25% free float for liquidity purposes.