FCA Proposes Rule Change in Pursuit of Aramco’s $2 Trillion Float

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To attract what is set to be the world’s largest float to date, the City regulator, the Financial Conduct Authority (FCA), has put forward consultation paper CP17/21. This paper details controversial proposals to amend several rules that may act as a barrier to the listing of Aramco, the Saudi Arabian oil giant, on the London Stock Exchange (LSE).

The consultation paper proposes rule changes that would allow for state-owned companies to apply for and receive a distinct category of premium listing. This would come alongside significantly less burdensome disclosure and regulatory requirements. Currently, premium listings require that 25% of a company’s stock is sold and that shareholders can vote in or out independent board members. These factors, among other things, would not apply to companies with a sovereign owner, like Aramco.

The FCA does not and has not indicated in the consultation paper or in any other communications that the purpose of this initiative is to convince the Saudi regime to list Aramco in London. However, recent visits of both Prime Minister Theresa May and Head of the LSE Xavier Rolet to Aramco’s CEO, Khalid al-Falih, indicate that there is widespread support to winning this prize float. As the company is valued at $2 trillion, the proposed float of 5% could be worth more than $100 billion.

The FCA proposal has been met with widespread criticism and accusations of a dilution of regulation and governance standards to win the lucrative business of the Saudi royal family. Further, it is not even clear that London will be chosen over the only other competitor, New York. However, London will certainly pursue this opportunity with vigour to ensure it retains its reputation as the world’s foremost financial centre, especially in a post-Brexit world.