The director of markets at the Financial Conduct Authority was today harshly criticised by MPs for the perceived failings of allowing the scandal-struck mining company ENRC to join the London Stock Exchange.
ENRC this week delisted from London but is under investigation by the Serious Fraud Office amid allegations of corruption after an unhappy few years on the LSE.
David Lawton, the head of the FCA’s UK Listing Authority, admitted to the Business, Innovation and Skills Select Committee that he was not aware lawyers Herbert Smith had, three months before ENRC was admitted to the London market in 2007, written a detailed audit criticising its probity. The report appears to be one which reportedly cited evidence of documents being falsified or destroyed.
The Conservative MP Brian Binley demanded: “You were not aware of it? An issue of that importance?”
Mr Lawton repeated that he was not, to which Mr Binley responded: “But you are the protector of the probity of our Stock Exchange. That is your role. Someone comes in and goes straight into the FTSE at your say-so when three months before a report details concerns about their operations?”
He added: “They [allegations] were right under your nose. An auditor had presented its report.” Mr Binley said: “You are the protector of the probity of our stock exchange. That is your role. You protect investors … Would you be desperately sorry and apologise … that these people got through your net?”
Mr Lawton, who was not working for the regulator at the time, said, given the information he got from ENRC’s sponsors, it did meet admission criteria.
He said: “We are a regulator of capital markets, not a regulator of companies’ corporate, tax, employment laws.” He added that regulators such as the Financial Reporting Council and the Takeover Panel carried out other duties.
The committee’s chairman, Adrian Bailey, questioned whether “Financial Conduct Authority” was the right name for Mr Lawton’s regulator: “Perhaps you do not really do what it says on the tin. It seems there is either a case for changing the name or extending the rights and responsibilities.”
Mr Lawton said: “There are some areas where the regime needs to be strengthened given the experience of the last two or three years.”
The FCA recently unveiled plans to strengthen the listing rules for companies with large individual shareholders to protect smaller investors.
The MPs went on to question in depth the legal liability of the sponsors who recommend firms to be allowed to list their shares in London.
Again, Mr Lawton said he was unaware who the financial sponsors were that brought ENRC to market. The sponsor was Deutsche Bank.
The committee went on to interrogate representatives of Glencore, Shell and Rio Tinto, who admitted their operations overseas, mainly in poor countries, employ few locals. However, they said, they do contribute significant tax revenues and investment.