FCA offers investors olive branch over $1trn Saudi Aramco float

6 March 2018, 17:19

The City regulator is offering an olive branch to investors who oppose a relaxation of its company listing rules as ministers scramble to secure a slice of the world’s biggest-ever flotation.

Sky News has learnt that officials from the Financial Conduct Authority (FCA) met key figures from the Investment Association (IA) last month to discuss ways of assuaging their concerns about a potential London flotation of Saudi Aramco.

The meeting was convened after months of protest from fund managers angered by a perceived weakening of UK rules in a brazen attempt to persuade Saudi royals to list Aramco on the London Stock Exchange.

News of the talks, which involved the IA's powerful investment committee, emerged on the eve of a visit to London by Mohammed bin Salman, the new Saudi Crown Prince.

The trip is expected to include deal-signings potentially worth billions of pounds to the UK economy, and the Saudi Aramco listing decision will feature heavily in discussions between British and Saudi officials.

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Sources said the FCA signalled during last month's meeting with the IA that it would be willing to tighten some of the protections afforded to minority investors under a new premium listing category for sovereign-backed companies, according to insiders.

The regulator announced plans for the new category last year, but the scale of opposition from investors has forced a rethink.

FCA executives presented ideas to fund management bosses that went beyond earlier proposals ensuring that investors would not be forced to hold Saudi Aramco shares against their wishes by excluding the oil giant from the FTSE-100 index.

One of the measures discussed at last month's summit is understood to have been abandoning a proposal that would allow Saudi Aramco to join the London market by listing just 5% of its shares - well below the usual 25% free-float requirement.

The IA's investment committee membership is not publicly disclosed but includes representatives from institutions such as Schroders and Legal & General Investment Management.

A source said: "It was a positive meeting.

"The FCA signalled its willingness to listen to fund managers' concerns and reflect them in any final rules," the person concluded.

Further talks between the industry and the FCA are expected to take place in the coming weeks.

London is vying with New York to land a slice of the Aramco float, although it remains possible that the international segment of the listing could be scrapped altogether, with the company's shares trading solely on the Riyadh bourse.

Estimates of Aramco's value veer wildly between about $800bn and $2trn.

The FCA and IA declined to comment.