IoD: ‘Watering down listing rules for sovereign controlled companies is unjustified’

The UK’s stock market listing rules should not be watered down for companies owned by sovereign wealth funds, business leaders said today. In its submission to the Financial Conduct Authority’s (FCA) consultation on creating a new premium listing category for sovereign-controlled companies, the Institute of Directors supported efforts to ensure that UK equity markets remain competitive post-Brexit, but insisted any changes to listing rules must serve to enhance, rather than diminish, the UK’s reputation for world-class corporate governance.

The business group argued that the FCA proposals, as they stand, do little to address the risks and challenges surrounding sovereign-controlled companies which include the potential for politically-motivated ownership interference over the company by the state apparatus. National governments are also in a strong position to undermine the rights of minority shareholders and the authority of the Board of Directors at such enterprises.

The IoD instead urged the FCA to not only reconsider its plans to waive current rules to accommodate such companies, but to strengthen them if it wishes to encourage these enterprises to list on the London market.

Stephen Martin, Director General of the Institute of Directors, said:

“The IoD is strongly committed to sustaining the City of London as a global financial centre as we embark on leaving the European Union. Attracting leading firms from around the world to list on the London Stock Exchange will be increasingly important, and this could include sovereign-owned companies.

“We have no objection to the creation of a new sub-set of the premium listing category for sovereign-controlled companies. However, the proposed rule changes for the new premium listed category are unjustified and could create governance problems. At best, they are changes that have been formulated without regard to available evidence concerning state-owned or state-controlled enterprises. At worst, they could be interpreted as an opportunistic attempt at boosting short-term primary issuance which ignores the longer-term implications for the overall UK corporate governance regime.”

“Good corporate governance serves to enhance business performance, protect investors and maintain the reputation of UK Plc and we do not believe the proposals in the consultation paper seek to strengthen these objectives. If the UK wants to encourage state-controlled companies to list in London, it is important that its listing regime is tailored to address the governance risks and challenges such companies pose.”

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