The City regulator will this week announce a clampdown on listing rules aimed at preventing the kind of scandals which have surrounded foreign mining companies such as Kazakhstan's ENRC and Indonesia's Bumi.
The Financial Services Authority is set to demand much greater corporate governance compliance and strong non-executive director representation from overseas groups that trade their shares in London. It will also tighten rules on using cash-shells as an easy way to float and call for larger free floats and more controls over majority shareholders.
Bumi, backed by financier Nat Rothschild, last week ordered an investigation into alleged financial irregularities which could amount to as much as $500m (£310m). It shares slumped as a result.
Corporate governance group Pirc said this was not a lone case: "Bumi is one of a number of recently listed companies that, while traded on the UK market, is essentially an overseas business.
"A number of such companies in the extractives industries have a very limited free float, so minority shareholders can struggle to have their voices heard, and unusual governance practices are difficult to challenge."
The FSA may also suggest certain types of company are barred from premium listing status until they have proved they comply with best corporate governance practices. For example, they would not be part of the FTSE 100 index and therefore tracker funds would not be forced into buying their shares.
These tighter rules contrast sharply with calls by Government ministers and the London Stock Exchange for a more lax listing regime to be introduced for technology and new media companies. They suggest that a lower free-float threshold – down to 10 per cent from 25 per cent – would encourage more entrepreneurs to float their companies in London.
- More about:
- Nat Rothschild
- Stock And Equity Market And Stock Exchange
- The Super-Rich