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FCA Proposes New Rules To Aid Saudi Aramco Listing On LSE

UK regulator, the Financial Conduct Authority (FCA) proposed new rules this week to enable sovereign state-owned companies like oil giant Saudi Aramco to list on the London Stock Exchange (LSE). The FCA has said that the proposal would help expand London’s role in global markets.

The controversial IPO of Saudi Aramco valued at $2 trillion is slated to be the biggest ever IPO. The Saudi government is planning on listing 5 percent of Aramco’s shares at this stage either in London or New York. It is seeking a premium listing in London but faces a problem due to regulatory rules that bar a premium listing unless at least 25 percent of the stock is on sale.

The premium listing carries approval from regulators that the company has the highest possible standards for corporate governance.

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In its latest proposal the FCA has suggested that a new premium listing category be created for sovereign-controlled companies. Although the FCA has insisted that the rule change is not targeted at the Saudi Aramco sale, no other applicable case has been mentioned.

In a statement Andrew Bailey, FCA chief executive, said

Refining the listing regime in this way would make UK markets more accessible while ensuring that the protections afforded by our premium listing regime are focused and proportionate. Sovereign owners are different from private-sector individuals or companies — both in their motivations and nature.  Investors have long recognised this and capital markets are well adapted to assess the treatment of other investors by sovereign countries

Public consultation on the proposal is expected to run till October and the FCA has said that further documents detailing the plans would be released shortly. London is aggressively pitching for the IPO since it would be a bonanza for banking firms, lawyers and other related industries.

Saudi Aramco has said that it is still to decide on where to list. The IPO is expected to be launched in late 2018. A 5 percent float alone would be worth around $100 billion (£78 billion).The Saudi royal family is looking at diversifying its economy in order to move away from its excessive dependence on oil.

While several fund managers in London have expressed concern that rules were being bent for one company, others have said that the changes indicated that London was open for global business. The London Stock Exchange Group has expressed its support via a statement noting that discretionary access for investors was essential for the success of UK markets and London’s role as a global financial hub.

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