The British Financial Services Authority intends to make rules stricter for foreign companies holding initial public offerings, saying that the liberal requirements of foreign companies whose stocks are traded on the London Stock Exchange increase the risks for investors.

The vast majority of the companies this change will affect are Russian. Observers say that the changes were spurred by the PricewaterhouseCoopers legal casein Russia and questions about the quality of the auditing of Russian companies.

Hector Sants, managing director for wholesale and institutional markets, made an announcement on Wednesday before a meeting with large British investors hinting at changes to come requirements for listing on the stock exchange. Several major British newspapers reported that the investors were concerned about the listing of Russian companied such as Rosneft and AFK Sistema. British companies now face stricter requirements before an IPO than foreign companies, being required, for example, to present accounts for the previous three years.

Just before Sants' announcement, John Thain of NYSE Euronext was quoted in the Financial Times as saying, “We are very concerned about corporate governance, transparency of company financials and protection of minority shareholders, and with a number of Russian companies these things are called into question.”

The Westerner officials' statements may unleash a scandal. Russian companies account for about 70 percent of all foreign companies represented there and are responsible for much of the turnover on the London Stock Exchange. Investment bankers estimate that Russian companies will place up to $20 billion on the LSE this year.

“The criticism by the Americans of the Russian companies is understandable,” commented Russian Federal Financial Markets Service chairman Oleg Vyugin. “London has begun to win business from them.” AFK Sistema press secretary Irina Potekhina told Kommersant, “Investors have no questions for us about the quality of the corporate management. The only question they ask us is what speed the capitalization of our company will grow at.” Rosneft press secretary Nikolay Manvelov told the newspaper, “at the moment our company entered the LSE, there was no investor dissatisfaction.” The LSE itself said that it approved of the intentions of the British authorities, although it had no claims against Russian companies.