The boss of the Financial Conduct Authority (FCA) has insisted he is not the regulator of “every aspect of corporate behaviour” amid growing concerns over plans for the fast fashion retailer Shein to float on the London Stock Exchange.
Nikhil Rathi, chief executive of the FCA, said it is not within the regulator’s power to intervene and block a company’s plans to list on the market due to concerns over its conduct in foreign countries.
Rathi told the Financial Times it was “not unusual” for UK-listed companies to face legal risks in other jurisdictions and “what’s important is that they disclose it, the investors understand it and they can price that risk”.
The comments point to backlash and growing concern over Chinese-founded Shein’s plans to debut in London due to concerns over its human rights record and ties to Beijing.
In an internal report earlier this year, Shein admitted it found two cases of child labour in its supply chain while human rights groups have accused the company’s suppliers of subjecting workers to mammoth shifts in substandard conditions.
The revelations have triggered a pushback from MPs and campaign groups after Shein filed papers with the FCA earlier this year to float in London.
However, Rathi suggested that concerns over the retailer’s supply chain would not factor into the regulator’s decision on whether to green light its initial public offering (IPO) plans.
“What parliament has not asked us to do is to be a broad regulator around every aspect of corporate behaviour and every company listed in the UK, everywhere around the world,” Rathi added, though he declined to comment on Shein specifically.
Asked whether the regulator would take into account concerns over supply chains and labour practices, Rathi told the Financial Times that the regulator’s focus was on “disclosures around the legal risks that a company may be subject to”.
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The comments could pave the way for what is likely to be the biggest IPO in London in more than a decade, with Shein set to fetch a price tag of some $50bn.
Shein, which is now controlled from Singapore, had originally tabled plans to float in New York but was met with furious political backlash from Washington over its data practices and supply chain.
MPs in the UK have similarly sounded the alarm through this year. Alicia Kearns, the Conservative MP and former chair of the Foreign Affairs Select Committee, said the London Stock Exchange and regulators needed to ask questions over “whose suffering is subsiding” Shein’s cheap prices.
“A company which has failed to make full disclosures about its supply chains as required by UK law, and where there are grave concerns about its factory working conditions has no place in London,” she told City AM.
Shein has said the cases of child labour in its supply chain were “resolved swiftly” and it had continued working with the supplier in questions “following appropriate remediation”.
The firm told City A.M. earlier this year, it has a “zero-tolerance policy for forced labour” and is “committed to respecting human rights”.