FCA could soften rules to secure Arm listing in London

But lobby groups have pushed back

The UK's Financial Conduct Authority (FCA) has offered to waive a significant part of the stock market's rules in an effort to persuade Cambridge-based chip firm Arm to list on the London Stock Exchange.

The Sunday Times, citing unnamed sources, said the FCA has told Arm it is willing to consider a waiver on regulations governing "related-party transactions."

Arm had previously told ministers and regulators about its concerns around related-party transaction rules, fearing they would compel it to report any transactions with its owner SoftBank Group or any of SoftBank's hundreds of investments.

The regulations, which aim to lower the possibility of secret conflicts of interest, could also mandate that Arm informs shareholders before engaging in business with other companies.

This could add huge amounts of bureaucracy to the daily work of a firm like Arm, with its existing ownership structure and licencing model.

Stakeholders push back

A major City lobby group has criticised the FCA for allegedly intending to break its own rules to convince Arm to list in London.

The Institute of Directors (IoD) said the FCA's proposal to waive market rules would undermine the integrity of both the rules themselves and the UK's wider governance framework.

The IoD's policy and corporate governance director, Roger Barker, warned there is a significant risk in relaxing established governance principles to win particular contracts.

"In the long term, good corporate governance is best served by the consistent and fair application of sensible listing rules that protect investors and other stakeholders," Barker said.

"The UK should not endanger its hard-won reputation for high governance standards by engaging in a regulatory race to the bottom."

Discussions continue

British authorities have been in discussions with SoftBank for several months about the possibility of a dual Arm listing, on both the London Stock Exchange and the Nasdaq in New York.

Last month, the Financial Times reported that Prime Minister Rishi Sunak met with Arm CEO Rene Haas in Downing Street to explore a London listing. Masayoshi Son, SoftBank's founder, participated in the discussions via video conference.

Arm told its private shareholders last year that its IPO would not take place until well into this year, squashing hopes that it would go public by the end of March.

SoftBank could reveal its intentions as early as Tuesday, when it releases its latest earnings report.

Arm was founded in Cambridge and listed on the London Stock Exchange before SoftBank bought the company and took it private shortly after the 2016 Brexit vote.

If it actually returns to London, it will be seen as a huge vote of confidence in the UK market.

Arm reported record revenues for its first financial quarter (ending in June 2022), making it one of the bright spots for SoftBank Group, which reported a group-wide $23.5 billion loss for the same period.

Arm could be worth up to $40 billion if it goes public, analysts have previously estimated. However, over the last year major digital firms like Meta, Alphabet and Amazon, have all seen their stock fall amid indications that increasing interest rates, soaring inflation and a deteriorating economy are affecting consumer demand.