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The UK’s chief financial watchdog has opened the door for Chinese fast fashion group Shein to join the London Stock Exchange, saying his decisions on whether companies can list in the UK are based only on their disclosures — and not on “every aspect of their corporate conduct”.
Nikhil Rathi, CEO Financial Conduct Authorityhe told the Financial Times it was “not uncommon” for UK-listed companies to bear legal risks around the world and “what’s important is that they disclose that, that investors understand that and can appreciate that risk”.
Shein filed confidential documents with the FCA this year to make an initial public offering in the UK with a planned market valuation of £50 billion. The regulator has arrived under pressure block the listing due to allegations that Shein uses forced labor as part of its cotton supply from China’s northwestern Xinjiang region.
“What parliament has not asked us to do is to be a broad regulator of every aspect of corporate conduct and every company listed in the UK, everywhere in the world,” Rathi said when asked about Shein but declined to comment specifically on the company.
One example of this is London-listed mining companies “find themselves facing legal difficulties in many different parts of the world”, he said.
Asked whether a questionable human rights record or suspicions about the use of slave labor would prevent the FCA from approving a company’s application for a UK listing, he said the regulator’s focus was on “disclosing information about the legal risks the company may be exposed to”.
Rathi also hit back at a report last week by MPs and peers who said the agency was “incompetent at best, dishonest at worst”.
The report from the all-party parliamentary group cited several cases where consumers and whistleblowers felt he had failed them.
Rathi said the report was submitted by a group within parliament and that “you will never get a full consensus in parliament”. He added: “Parliament as a whole voted to give us more growth and competitiveness targets, not less, and that’s the law – so we accept that.”
Chancellor Rachel Reeves told an annual dinner at Mansion House last month that the rules were drawn up after the 2008 financial crisis. “gone too far” and they stifled risk-taking, sending a “remit” letter to the FCA urging it to do more to support growth.
Rathi, who joined the FCA four years ago after leading the London Stock Exchange for five years, said the agency had planned several reforms to reduce the regulatory burden and encourage greater risk appetite in the UK. This includes changing the rules for providing pensions advice, reducing the need for issue a prospectus for secondary sales of shares and adjusting the way customer complaints about financial services are handled.
Earlier this year he overhauled the rules for London-listed companies to increase their flexibility in areas such as dual-class share structures to try to attract more UK IPOs.
“We are making and have made significant progress,” Rathi said. “It opens up a debate about how we support growth and competitiveness, but also what risk appetite we need in the economy and society in general so that we’re all comfortable making changes.”
Citing the example of the government’s plans to give the FCA powers to regulate cryptocurrency markets such as Bitcoin, Rathi said that “crypto is here to stay” but it is important “that we are all comfortable with the risks that could flow and that compensation will not and will not should be available if things don’t work out”.
He said the UK needed to have a debate about its “increasing culture of mass complaints” driven by no-win, no-fee law firms and claims management companies set up to encourage clients to make claims in exchange for a reduction in any legal protection.
Analysts have predicted that the recent controversy surrounding the alleged misuse of car finance due to hidden commissions paid to dealers could cost banks as much as £30bn in damages. The FCA and the Financial Ombudsman Service unveiled plans last month to shake up the way complaints are handled to avoid more “expensive mass redress events”.
“What is particularly characteristic of the UK compared to some of our peers around the world is how quickly the debate moves to compensation when something goes wrong,” Rathi said. “We need to have that discussion.”
The 45-year-old was recently shortlisted for the vacant post of cabinet secretary, the highest-ranking civil servant, but was not shortlisted. His five-year term at FCA expires at the end of September. Asked if he plans to run for a second term, he said: “I enjoy the work I do here, but other than that I don’t comment on any speculation.”
