MPs seek answers on Saudi Aramco listing

The chairwomen of two Parliamentary committees have asked the City regulator to explain proposed rule changes seen as favouring the world's largest oil company, Saudi Aramco.

It follows reports Saudi Aramco plans to list 5% of its shares in London or another stock market in the West.

UK rules state more than 25% of shares should be listed to stop a single shareholder having too much dominance.

But proposals put forward by the FCA in January could allow for exceptions.

The regulator has proposed waiving a number of requirements for sovereign-owned companies.

What's the fuss about Saudi Aramco and the London market?

These include the need to provide independent shareholders with their own separate vote on the appointment of independent directors, which can potentially delay the process by up to 90 days.

An FCA consultation on the proposed changes will close on 13 October and the regulator will make a policy statement before the end of the year.

According to reports, Saudi Aramco could be valued at $2tn (£1.5tn) when it lists - a huge price tag that would also generate hundreds of millions of dollars in fees for investment bankers, lawyers and other professional firms involved in stock market flotations.

The call for clarity comes in a letter addressed to FCA chief executive Andrew Bailey and signed by Nicky Morgan and Rachel Reeves, who chair the Treasury and business select committees respectively.

The government has been doing its bit to land this big fish.

In May of this year, Theresa May accompanied the boss of the London Stock Exchange to Riyadh on a charm offensive and one of questions underlying Nicky Morgan and Rachel Reeves' letter to the FCA is whether there was any improper influence exerted on an independent watchdog by government.

When it comes to doing business with the UK, Saudi Arabia has often been seen to play by slightly different rules.

The FCA declined to comment other than say they would respond to the questions in due course.

New York is still considered the favourite in the race for the Aramco listing, but the London Stock Exchange, the regulator and the government are trying very hard to lure it to the UK.

Too hard for some.

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In their letter, they ask: "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?"

Mrs Morgan said the UK had "a world-class reputation for upholding strong corporate governance", which the FCA had to protect in the post-Brexit world.

Mrs Reeves added: "As we leave the European Union, it's important the UK seizes new opportunities for business, but it should not be at the expense of diminished corporate governance standards."

An FCA spokesman said: "We have received the letter and will respond in due course."

This is not the first time that the proposed rule changes have been called into question.

Last month, the Institute of Directors said the rules should not be watered down, while pension firm Royal London Asset Management has spoken out against "bending listing rules and bending benchmark rules".