Business leaders warn FCA reforms risk UK’s good governance reputation
The Institute of Directors (IoD) has criticised the City watchdog's decision to press on with a controversial new category within its premium listing regime, saying it risks the UK's reputation in good governance.
The Financial Conduct Authority this morning said it will proceed with plans to create the new category to cater for sovereign-controlled businesses, aimed at companies controlled by a shareholder that is a sovereign country. It will be in place from 1 July 2018.
Stephen Martin, director general of the the business group, said today:
The IoD is deeply disappointed that the FCA has decided to press ahead with the creation of a new premium listing category which reduces key corporate governance requirements.
This decision has been made despite opposition from across the governance spectrum and without providing evidence as to the necessity for the reduction in standards.
Read more: FCA to bring in controversial new premium listing category in July
He warned that by allocating the "premium" term to organisations not obliged to meet key requirements in relation to minority shareholder protections and independent directors, the FCA "not only risks the markets reputation with investors but the UK's global reputation as a leader in best practice and good governance".
The plans were originally floated with an eye on making it easier for oil major Saudi Aramco to list in the UK, as part of a concerted effort by British authorities to draw the listing away from New York and Hong Kong.
The City watchdog said today it had taken on board consultation feedback, so it will include a requirement for the election of independent directors to be subject to separate approval by independent shareholders.
Disclosure obligations on related party transactions beyond market abuse regime disclosures have also been added, which would mean "timely disclosures" on transactions between the sovereign and the issuer.
Martin acknowledged the changes, but said they didn't go far enough, and the IoD reiterated its recommendation that the appointment of independent directors be ratified by a binding vote of independent shareholders, as well as by the vote of the shareholder constituency as a whole.
Andrew Bailey, the FCA's chief executive, said: "This package recognises that the previous regime did not always work for these companies or their investors. These rules encourage more companies to adopt the UKs high governance standards."
Read more: City watchdog seeks to reassure big investors on Saudi Aramco float
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