Yesterday London proved defiant to claims of an economic downturn, retaining its position as the world’s financial centre.The Financial Conduct Authority (FCO) has thrown its weight behind new regulations to allow for the inclusion of new markets. The changing of rules would allow for new the addition of new markets to London’s premium stock listings. This move has alarmed the Institute of Directors who see it as bending the rules for new markets.
FCO Bending the rules for new markets?
The Institute of Directors has condemned the move as creating ‘watered down’ rules to attract new financial prospects. Relaxing these laws would allow for companies such as the state owned Saudi Aramco to enter the market. The IoC regards it as a ‘politically motivated’ action in light of continued Brexit negotiations. These new markets provide a greater economic potential if it gains approval, but dangers along with it.
The potential of changing regulation
The Financial Times reports the regulatory changes as an attempt to capture great public offerings from New York. Rather than being politically motivated, was part of wider proposed reforms to improve competitiveness post-Brexit. These regulation changes coincide with Saudi Aramco’s reforms to allow for increased privatisation to cut its deficit.
With management changes taking place, this would lead to the trading of 5% of Aramco’s £1.5 trillion shares. These changes would result in a longer term influx of new markets for the UK from companies with less than regulatory minimums.
The dangers of FCO’s relaxing regulation
While widely welcomed by the London Stock Exchange, Financial experts have warned of the hazards of relaxing regulations on new markets. State owned oil includes many international companies, but aren’t subject to regulation other than their sovereign government. This lack of control makes State owned companies more likely of corrupt practices which would damage London’s international reputation.
The risk is also to potential investors and brokers who would depend on regulations to protect their investments. In corruption cases involving state-owned companies, losses were in their reputations and capital. The relaxing of regulation sets a longer precedent for defying demands for greater transparency, only likely to put off future investment.
The future of investment
While opposition to it has been vocal, proposals for relaxing trading regulations look set to take place. But groups such as the IoC among others look set to continue to argue against it the best of their abilities. With Brexit negotiations underway, Britain’s financial sector is prioritising any means of assuring its competitive edge over rivals.
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