UK listings: new rules are late and off-target

Talk about closing the stable door after the horse has kicked holes in the walls, scared the farm hands and bolted back to the steppe. Rishi Sunak is mooting a national security provision to block companies from listing on the London Stock Exchange. This appears aimed at businesses from the former Soviet Union linked to regimes there. Only recent air piracy by Belarus gives this belated move a sheen of timeliness.

Any such law championed by the chancellor would feature as a companion piece to a recently enacted national security law. This gives the UK wide powers to scrutinise and block takeovers that might deliver sensitive technologies to its rivals. Here, China is the implicit threat.

The growing split between democratic and authoritarian world powers is proving a great antidote to moral relativism. Ex-CIS companies have been linked to local regimes for as long as Chinese business has been buying or appropriating western trade secrets. Previously, western businesses — particularly investment banks — were inclined to shrug and talk about “cultural differences”.

The current shift has more to do with consolidation of power by China and Russia than the City’s painful experience over the past two decades. A number of businesses from former CIS countries listed in London, notably FTSE 100 member Eurasian Natural Resources Corp. Revelations over the appalling governance of this Kazakh miner showed how mismatched expectations of oligarchs and City investors could be.

ENRC delisted. EN+ is still on the market. Oleg Deripaska floated global depositary receipts in the energy company in London in 2017. The Russian tycoon’s supposed ties to President Vladimir Putin, which he denies, have raised eyebrows. He has been subject to sanctions in the US since 2018.

London is also a venue for $1.25bn of eurobonds issued by Belarus. The west is furious with President Alexander Lukashenko for commandeering a Ryanair flight in order to arrest a critic at the weekend.

Usually corporate governance is the bailiwick of the Financial Conduct Authority, gatekeeper of listing rules. Preserving national security falls to the government. Blocking listings, as it plans to, is no way to foil spooks.

It is, however, clear to the City which countries have least-favoured nation status. Ministers’ previous disengagement left banks and exchanges to make their own judgments. Goldman Sachs, for example, smartly withdrew from one float when the alleged underworld links of a prospective client surfaced. The City failed to raise certain eastern businesses’ low standards of governance. These now figure as a threat rather than an opportunity.

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