U.S. Markets closed

U.K. Could Block Some London Listings on Security Grounds

·3 min read

(Bloomberg) -- U.K. Chancellor Rishi Sunak is set to propose powers to block companies from listing on the London Stock Exchange if they pose a national security threat.

He is set to launch a consultation on the plans in the coming months, the Treasury said Tuesday.

The move, first reported in the Financial Times, comes after concerns were raised that current rules allowed Russian oligarch Oleg Deripaska -- who is subject to sanctions in the U.S. -- to list his energy company EN+ in 2017.

The House of Commons Treasury committee said in 2019 that the listing was a “clear example of the risks inherent in the government’s fragmented approach to sanctions design and implementation.”

Decisions over the eligibility of companies to list on the LSE are currently made by an arm of the Financial Conduct Authority, but under Sunak’s plans, some potential listings could be referred to the National Security Council.

“The U.K.’s reputation for clean, transparent markets makes it an attractive global financial center,” the Treasury said in a statement. “We are planning to bolster this by taking a targeted new power to block listings that pose a national security threat.”

The consultation comes amid a push by the government to boost the U.K.’s listing regime, part of a slate of reforms to increase the attractiveness of London as a financial hub after Brexit. Plans include changing stock exchange rules around blank-check firms and allowing company founders to keep greater control when they list their businesses in the city.

With more than $10 billion of initial public offerings this year, London is the biggest listing venue in Europe, according to data compiled by Bloomberg. That lags New York, where nearly $72 billion has been raised, and Hong Kong, which has drawn nearly $21 billion of listings.

Deal Flow

The proposed national-security rules are unlikely to have much of an impact on deal flow in the near term assuming they are used circumspectly, according to Nick O’Donnell, a London-based partner at law firm Baker McKenzie. “Although a refresh of the rules is overdue, the changes should be proportionate,” he said.

The shift will align London more closely with other major trading venues such as New York, which prohibits floats of companies with connections to people on the specially designated nationals and blocked persons list maintained by the U.S. Treasury, said Markus Bauman, head of European strategic relationships at law firm Goodwin.

The U.S. has tightened restrictions on Chinese firms listed on its exchanges, with legislation that requires the companies to allow inspectors to review their financial audits. China has long refused to let the U.S. Public Company Accounting Oversight Board examine audits of firms whose shares trade in America, citing national security interests.

The China Securities Regulatory Commission is considering proposals that would require firms seeking IPOs outside mainland China to submit listing documents to ensure they’re compliant with local laws and regulations, and to prevent any leaks of sensitive data that might be of national security interest, Bloomberg News reported earlier this month.

(Updates with details of global listing reforms in last four paragraphs.)

More stories like this are available on bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.