London Feeling the Heat on its Lax Rules for Russian IPOs

Following harsh criticism from NYSE officials that London’s rules for listing new companies from emerging markets are excessively lax (mainly in reference to 22 Russian firms listed on the LSE, totalling £221 billion), Britain’s Financial Services Authority is taking action to review the rules. As demonstrated by the listing of Rosneft last year, whose primary value is derived from the stolen property of Yukos, the London Stock Exchange is willing to list companies with very little accounting transparency and openly sketchy corporate governance. Whatever your opinion may be in regards to the Rosneft IPO, there is legitimate concern that investors are not being sufficiently protected, and that minority shareholders in Russian companies that lack clear corporate governance laws (esp. when the majority shareholder is the Federation) are at risk of having their rights violated. With this kind of loose oversight, Russia is actually able to export business opacity, and significantly damage the quality of the exchange. I hope that all global trading floors raise the standards for public listings – uniform rules, accounting practices, and transparency will be good for everyone, especially for Russian entrepreneurs.

London’s laissez-faire oversight for public listings has been likened to a “casino” culture

From the FT:

Peter Montagnon, head of investment affairs at the Association of British Insurers, said investors were concerned about confusion between different types of London listings. These include primary, with traditional corporate governance standards; secondary, which need no primary listing elsewhere and have minimum regulation; and global depositary receipts, only available to professional investors. The LSE also operates the Aim junior market with weaker regulation. “There’s a risk of confusion here, and there’s a risk that if we are not careful we could sacrifice some of London’s reputation for quality and with it one of the reasons it is an attractive market,” he said. Even some investment bankers – who make large fees from listings – are concerned. A senior industry figure said: “Has it gone too far? Not yet, but we’re close.” The LSE has been successfully promoting itself in Russia but is keen to head off investor criticism, which surfaced last year when several big groups attacked the listing of Rosneft, Russian oil producer. The LSE welcomed the debate. “We are particularly keen to have clear labelling of the different forms of listing, giving investors the choice but making sure it is very clear exactly what they are being given,” it said.