By Kylie MacLellan
LONDON, Nov 5 (Reuters) - Britain's financial regulator isto bolster its stock market listing rules to better protectminority shareholders, after high-profile scandals at miningcompanies ENRC and Bumi left some investorsnursing heavy losses.
The Financial Conduct Authority (FCA) said on Tuesday newmeasures to be introduced next year would include a requirementfor companies in which one shareholder owns more than 30 percentto have a "relationship agreement" in place to ensure they canoperate independently from that shareholder.
Investigations into alleged irregularities at Kazakh mininggroup ENRC, which listed in London in 2007, andIndonesia-focused Bumi, listed in 2011, have raised questionsover their route to market and damage done to the interests ofminority shareholders.
Both companies, at least initially, had significantshareholders with controlling shares - ENRC was controlled byits trio of founding shareholders and the Kazakh government,while Bumi was effectively controlled by the Bakrie family whichco-founded it.
ENRC is now set to delist from the London Stock Exchange(LSE) after a buyout by the founders and the Kazakhgovernment.
The FCA said it would set minimum requirements forrelationship agreements, which for example ensure thatindependent shareholders could have the ability to vetotransactions between a business and its main owner.
Many companies with majority shareholders already haverelationship agreements, but shareholders have often complainedthat they are either ignored or ineffective.
Bumi, for example, did have a relationship agreement withthe Bakrie family, but that 2011 deal allowed the family tonominate the chairman, chief executive and chief financialofficer.
PROTECTING INVESTORS
The rules, first proposed by the FCA's predecessor theFinancial Services Authority, will apply to companies with a"premium" listing, who already face higher requirements onregulation and corporate governance than those with a standardlisting.
Under the changes, minority shareholders will also havegreater power over the election of independent directors, whowill have to be approved by both the shareholders as a whole andthe minority group.
The Association of British Insurers, whose members managenearly $3 trillion of assets, is among those who have called formore protection for minority investors.
Some had called on the regulator to increase the minimum"free float", the proportion of a companies shares which must befreely available to trade, from its current level of 25 percentto as much as 70 percent.
The FCA stopped short of this, however, saying it needed tobalance protections with unnecessarily increasing the regulatoryburden on companies that are already well governed.
Shares subject to a lock-up of more than 180 days will notcount towards the free float level, however, the regulator said,and it is also further consulting on criteria it should takeinto account when considering waivers in individual cases.
There are around 50 premium-listed companies on the LSEwhich have a controlling shareholder. Those who do not alreadymeet the new rules will have six months from the mid-2014implementation to ensure they comply.
