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Abu Dhabi, UAEMonday 25 June 2018

British MPs demand answers from City watchdog on Aramco float rule changes

Two influential parliamentary committees have written to the Financial Conduct Authority to question the thinking behind recent decisions

London and New York are both courting Saudi Aramco to secure the potential float of the $2tn stake in the company
London and New York are both courting Saudi Aramco to secure the potential float of the $2tn stake in the company

British MPs have asked the Financial Conduct Authority (FCA) to explain whether key rule changes announced by the City watchdog that would allow Saudi Aramco to float in London had been influenced by political considerations.

The chairs of two key parliamentary bodies, Tory Nicky Morgan at the Treasury select committee, and Rachel Reeves (Labour), who heads up the business, energy and industry committee, have written to Andrew Bailey, chief executive of the FCA to ask whether ministers intervened in a bid to lure the £1.5tn float to the City.

The FCA recently launched consultations on whether it would create a new category allowing firms that were controlled by a shareholder that is a sovereign country to float on exchanges in London, even when they had less than 25% of their operations in Britain.

The plan was widely seen as an attempt to lower any barriers to Saudi oil company picking London for its stock market listing, a boost to the country in the wake of Brexit. Concern was raised by many in the City that such a potentially cynical move could damage London’s reputation, and now the MPs committees have sent a joint letter to the FCA.

“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,” the letter says, before listing seven questions.

Bailey is asked “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?”

The chairs then 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 Aramco float, which would see the Saudi oil giant sell off a 5% stake, is being energetically courted by both London and New York. Earlier this year the British prime minister Theresa May and the head of the London Stock Exchange, Xavier Rolet, visited Riydah, the Saudi capital, to meet with Aramco chief executive Khalid al-Falih, who is also the kingdom’s energy minister.