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FCA Head Defends Pro-Aramco Listing Changes

The head of the Financial Conduct Authority, the UK’s top financial markets watchdog, has defended the changes to its premium listing rules that will make it considerably easier for Saudi Aramco to float 5 percent on the London Stock Exchange.

In an interview with City AM, Andrew Bailey said the rule change would be beneficial for both companies in the premium segment, and for the City as well by ensuring the upholding of high governance standards.

The new rules will go into effect starting in July and will involve less stringent listing requirements for companies that are majority-owned by sovereign states that want to become part of the premium category on the London Stock Exchange.

The changes caused a lot of criticism from financial industry circles when first proposed, and now this criticism is still vocal despite a lengthy consultation process that sought to smooth things over.

One critic, the chief executive of the Investment Association, Chris Cummings, told City AM that the body was disappointed by the fact that companies in the premium category would be free to make third-party transactions without prior consultation with other shareholders. The only thing these companies will be required to do is to inform shareholders about the transaction after carrying it out.

Related: Iran: Oil Prices Could Jump To $140 On U.S. Sanctions

Another opponent of the pro-Aramco changes, Stephen Martin who heads the Institute of Directors, said he did not see why a relaxation of the premium listing rules was necessary at all: “If anything, we believe that listing rules should be strengthened for this category of issuer given its distinctive governance challenges and risks,” he said.

Yet the FCA has been very active in its efforts to make Aramco pick the LSE for the international leg of the Aramco listing, despite the fact that the chances of such a listing happening are getting slimmer by the hour, especially with oil prices back down from US$80. Many doubt even the local market listing of Aramco would take place in the current price environment and the changing risk appetite of large energy investors.

By Irina Slav for Oilprice.com

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  • Mamdouh G Salameh on June 11 2018 said:
    This is now academic as Saudi Arabia will quietly withdraw the IPO of Saudi Aramco altogether as it no longer needs it financially.

    Still it shows how the London Stock Exchange was prepared to twist its premium listing rules in order to attract Saudi Aramco to float 5% on its Exchange. Obviously the rules are changeable if the business warrants it.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London.

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