UK MPs to quiz FCA over listing proposal amid Aramco suspicion
MPs on two powerful committees will probe the UK's financial regulator on whether political influence was brought to bear on a proposal to loosen listing rules that could have attracted the $2tn flotation of Saudi Arabian oil corporation Aramco. The head of the Financial Conduct Authority, Andrew Bailey, will face the Treasury select committee and the business, energy and industry committee on whether the watchdog met ministers before considering the proposal. The FCA didn't mention the company, Aramco, when announcing its intention to explore the plan.



The Financial Conduct Authority is facing questions from MPs about whether political influence was behind proposed City rule changes that could lure the $2tn (£1.5tn) float of Saudi Aramco to London.

Andrew Bailey, the chief executive of the FCA, is being asked by the chairs of two powerful Commons committees whether there were any discussions between the City watchdog and ministers ahead of the consultation on the planned changes.

The FCA did not mention Aramco when it began consulting on its proposal to create a new category for firms controlled by a shareholder that is a sovereign country. But the plan was immediately seen as an attempt to lower any barriers to the $2tn Saudi oil company picking London for its stock market listing, which could boost the UK in the wake of Brexit.

Major City investors warned the plans could damage London’s reputation and the matter is now being raised by Nicky Morgan, the Conservative MP who chairs the Treasury select committee, and Rachel Reeves, the Labour MP who chairs the business, energy and industry committee.

In a joint letter, the two chairs tell Bailey: “We are interested to explore the rationale for this consultation, particularly given the concerns expressed by shareholders that these proposals would weaken protection for private investors against interference from foreign sovereign company owners.”

They pose seven questions for Bailey, including “to what extent was the FCA aware of any interest shown by Saudi Aramco in obtaining a UK listing, and if known, how far that interest influenced the consultation?”

They also ask: “What discussions did the FCA (whether at board or working level) have with ministers or officials from government departments in advance of and during the consultation, and in particular on the balance between attracting foreign investment and maintaining the integrity of the UK markets?”

The committees are being reformed after the July general election and are likely to be formally constituted next week. Both Morgan and Reeves said they would discuss Bailey’s response with their members, signalling further scrutiny from the MPs.

Saudi Arabia is planning to sell off a wide range of assets in the face of a weak oil price. The sale of a 5% stake in Aramco - probably next year – is key to the plan and could value the entire company at $2tn. The Financial Times reported on Thursday that some changes were made to parts of the economic transformation plan but that these would not affect Aramco’s sell-off.

London and New Year are regarded as vying for the listing and in April Theresa May and Xavier Rolet, chief executive of the London Stock Exchange, visited Riyadh to meet Aramco’s chief executive, Khalid al-Falih, who is also the kingdom’s energy minister.

The FCA proposals would enable state-owned companies to qualify for a premium listing – which has more onerous corporate governance rules and is valued by investors – but escape two key hurdles. One relates to how the company and the controlling shareholder conduct deals with each other; the second allows investors a vote on independent directors.

Morgan said: “The UK has a world-class reputation for upholding strong corporate governance. The FCA must protect this reputation, especially as the City looks to remain competitive and thrive post-Brexit. Any changes mustn’t dilute the protection afforded by the ‘premium listing’ brand.”



She said the FCA’s consultation would be examined by the Treasury select committee, which she was elected to chair after the general election in July.



Reeves said that while it is important for the UK to thrive after Brexit it should not be at the expense of a weaker corporate governance regime. “Getting this balance right will be vital to the UK’s long-term future as a key financial centre and an attractive market-place place for investors. The FCA’s consultation relating to its premium listing regime raises questions about the UK’s reputation for sound corporate governance.”

The FCA confirmed it had received the letter and that it would reply in due course. At the time of the consultation, Bailey said sovereign owners had different motivations from private sector individuals or companies. The consultation ends on 13 October.