Norway wealth fund warns UK against listing change

Disquiet grows over proposed loosening of standards to attract Saudi Aramco to London.

The world’s largest sovereign wealth fund has sharply criticised UK plans to change its stock market listing rules, adding to disquiet over a proposed loosening of standards to attract the IPO of Saudi Aramco , Saudi Arabia’s state-owned oil company - writes

Norges Bank Investment Management, which manages Norway’s oil fund, warned the Financial Conduct Authority that its plans to create a “premium” listing that would exempt companies controlled by governments from some rules could harm minority shareholders. NBIM said the protection of minority shareholders was a “requirement” of the fund’s financial interests.

“The UK has an advanced corporate governance framework that is often considered best in class worldwide. This helps encourage investor confidence and attract capital to UK markets,” NBIM, which has invested £44bn in UK equities wrote in its response to the FCA’s consultation on the changes. “The proposal, as currently drafted, could be seen as a step back in terms of investor protection.”

The FCA’s plans have been widely criticised by institutional investors for loosening corporate governance rules in an effort to attract Aramco’s mooted $2tn IPO. But it also has support from some in the City, eager to secure what promises to be a fee bonanza for advisers.

London is vying with financial centres such as New York for what would be the world’s largest IPO, with Aramco planning to float about 5 per cent of its shares. Theresa May, the prime minister, and Xavier Rolet, head of the London Stock Exchange, travelled to Saudi in April to press London’s case.

Aramco may yet choose to shelve its international listing and place its shares privately in tandem with a Saudi IPO. The world’s largest oil producer has insisted that its plans — a keystone of wider economic reforms by Prince Mohammed bin Salman, the kingdom’s crown prince, are still on track.

Andrew Bailey , the head of the FCA, last week admitted that the watchdog met Aramco earlier this year ahead of the proposals. The UK parliament’s Treasury select committee has already promised to question Mr Bailey on the matter this month.

On Tuesday night, Mr Bailey told a room full of some of the harshest institutional critics that the plans “create a sensible balance between open markets and integrity”. He said: “To pick an argument about whether we should or should not meet people who want to operate within the UK regime is, in my view, to pick the wrong argument.”

He was talking at an event run by the Investment Association, a trade body for institutional investors, which had told the Sunday Times this week that “investors must have confidence that a company is run for all shareholders, not just the major or controlling shareholder”.

Under the FCA’s proposals, a sovereign shareholder would not be treated as a related party, meaning it would not need prior shareholder approval for a transaction between the government and the company.

NBIM wrote that the existing rules “were introduced to provide the necessary checks and balances to protect the interests of minority shareholders from potential abuse. We consider these safeguards to be particularly important when the company has a controlling shareholder, such as a sovereign state.

“The related-party transaction rules were established so that minority shareholders can verify the integrity of a business transaction and prevent misuse of company assets.”

The FCA’s consultation closed last week and the watchdog is expected to make a final policy statement at the end of the year.

Read other news of Oslo here.
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