Summary and reason for submission:

This letter, submitted by Goodenough Ring Solicitors on behalf of Ekō, raises significant legal and ethical concerns regarding the potential listing of SHEIN on the UK official list, which would be overseen by the Financial Conduct Authority (FCA). The letter argues that approving SHEIN's listing could violate the FCA's statutory duties under the Financial Services and Markets Act (FSMA) and the UK Listing Rules (UKLR). Key issues highlighted include allegations of forced labor within SHEIN's supply chain, intellectual property infringement, hazardous chemical use, unsustainable environmental practices, and possible "greenwashing" by SHEIN’s authorized firms. The letter asserts that listing SHEIN would be contrary to the FCA’s objectives of consumer protection, integrity, and fair competition, and urges the FCA to reject SHEIN’s application or, at minimum, thoroughly investigate and ensure SHEIN’s compliance with all UK and international standards before approving any listing.

This letter below was submitted to request the FCA's careful consideration of Ekō's concerns regarding SHEIN's listing application and to urge the FCA to prevent any potential breaches of regulatory duties that could arise from approving SHEIN's listing.

Clare Cole

Director of Market Oversight

Primary Market Oversight Department

Financial Conduct Authority

12 Endeavour Square

London, E20 1JN

By email only: Clare.Cole@fca.org.uk 

Cc: listingapplications@fca.org.uk

Our ref: EKO00001

19 September 2024

Dear Sir or Madam,

Re: Proposed admission of SHEIN to the official list

1. We write on behalf of our client Ekō Movement (“Ekō”) regarding SHEIN’s reported application to the Financial Conduct Authority (“FCA”) for admission to the official list.

2. Ekō is a community of people from around the world working to ensure companies respect the environment, treat their workers well and respect democracy. Ekō holds companies and regulators to account when they fail to do so.

3. SHEIN reportedly founded in China, by Chris Xu, also known as Xu Yangtian, as a low-cost apparel merchant, was originally headquartered in Guangzhou before moving to Singapore in 2022.[1] The company operates a global fast fashion business, leveraging real-time data and algorithms to identify emerging fashion trends and rapidly place orders with a vast network of suppliers, allowing it to quickly respond to consumer demands.[2] In 2022, its sales were estimated at $100 billion, and it generated $23 billion in revenue.[3]

4. We set out below why the FCA would likely breach its duties under the Financial Services and Markets Act 2000 (“FSMA”) and the UK Listing Rules 2024 (“UKLR”) if it admits SHEIN to the official list, including as a result of potential breaches by SHEIN of the UKLR and anticipated breaches by its advisors under anti-greenwashing provisions.

5. Even if the FCA consider they have authority to approve SHEIN’s listing application, for the reasons set out below, the FCA ought to exercise their discretion to refuse to do so.

Legal Framework

The FCA’s duties

1.        The FCA is responsible for maintaining the official list. In determining applications to the official list, the FCA must comply with its general duties under Part 1A.

2.        The FCA’s general duties require it, so far as reasonably possible, to:

i.        Ensure that the relevant markets function well (the strategic objective); and

ii.       Advance one or more of its operational objectives, which are:

1. Consumer protection
2. Integrity
3. Competition.[4]

3.      The consumer protection objective is securing an appropriate degree of protection for consumers[5]. To this end, the FCA must have regard to various matters,[6] including:

●        differing degrees of risk for different kinds of investment;

●        the needs of consumers for the timely provision of information that is accurate and fit for purpose;

●        that those providing regulated financial services provide consumers with a level of care that is appropriate having regard to the degree of risk involved in relation to the investment and the capabilities of the consumers.

4.      The integrity objective is protecting and enhancing the integrity of the UK financial system, including it not being used for a purpose connected with financial crime, such as any offence involving fraud or dishonesty and handling the proceeds of crime.[7] “Offence” in this context includes an act or omission which would be an offence if it had taken place in the United Kingdom.[8]

5.      Offences under the Proceeds of Crime Act 2000 (“POCA”) include using, acquiring, converting and transferring ‘criminal property’ and entering into an arrangement which is known or suspected to facilitate the acquisition, retention, use or control of criminal property by or on behalf of another person. ‘Criminal property’ is defined as the benefit of ‘criminal conduct’. Acts committed abroad can amount to criminal conduct if that conduct would constitute an offence in the UK.[9]

6.      Under the Modern Slavery Act 2015 (“MSA”) it is an offence in the UK for a person to hold a person in slavery or servitude or require another person to perform forced or compulsory labour and the circumstances are such that the person knows or ought to know that it amounts to forced or compulsory labour.[10]

7.      The meaning of forced or compulsory labour is construed in accordance with Article 4 of the European Convention on Human Rights (“ECHR”) and regard may be had to all the circumstances, including personal circumstances that make the person more vulnerable, such as the individual being a child.[11] Consent is specifically not a barrier to a finding of forced or compulsory labour.[12] The ECHR does not define forced or compulsory labour but the European Court of Human Rights has referred to the International Labour Organisation (“ILO”) definition.[13]

8.      The MSA also requires companies supplying goods or services with a total turnover of over £36 million to prepare a slavery and human trafficking statement for each financial year of the organisation, which sets out the steps taken to ensure that slavery and human trafficking is not taking place in any of its supply chain and in any part of its own business.[14]

9.      The competition objective is promoting effective competition in the interests of consumers in the financial services markets.[15]

10.  In addition to complying with its general duties, the FCA must, as a secondary objective act in a way that advances the competitiveness and growth objective,[16] which involves facilitating:

1. international competitiveness of the UK economy, and
2. its growth in the medium to long term,

provided that any acts ‘align with international standards’. [17]

11.  In maintaining the official list, the FCA is responsible for approving all listing particulars (usually a prospectus).[18] The FCA may admit to the official list such securities and other things as it considers appropriate.[19] The FCA may not grant an application for listing unless it is satisfied that the UKLR and any special requirements are complied with.[20]

12.  Similarly, the FCA cannot approve Shein’s prospectus unless it contains all such information as required by FSMA,[21] the UKLR,[22] Regulation (EU) 2017/1129 of the European Parliament and of the Council as amended by the Prospectus (Amendment etc.) (EU Exit) Regulations 2019 (“Prospectus Regulation”), the Commission Delegated Regulation (EU) 2019/980 (“PR Regulation”) the Regulation Rules Instrument 2019 FCA 2019/80 (as amended) (“PRR”).

13.  The FCA has general powers to request further information from issuers and others,[23] and, when considering an application for admission to listing, the FCA may take into account any information which it considers appropriate in relation to the application.[24]

14.  Furthermore, an application for listing may be refused if, for a reason relating to the issuer, the FCA considers that granting it would be detrimental to the interests of investors.[25] Alternatively, the FCA may make the admission of securities subject to any special requirement that it considers appropriate to protect investors.[26]

15.  When assessing whether risk factors have been adequately addressed in a draft prospectus, the FCA must consider whether the draft prospectus is drawn up in accordance with the Prospectus Regulation and the PR Regulation.[27] Of particular relevance is:

1. scrutiny of the comprehensibility of the information, including whether there is a clear description of the nature of the issuer´s operations and its principal activities;[28]
2. scrutiny of the consistency of the information contained in the prospectus.[29] Again, of particular relevance are: (b) whether any material and specific risks disclosed elsewhere in the draft prospectus are included in the risk factors section, (e) whether the description of the issuer in the operating and financial review, the historical financial information, the description of the issuer’s activity and the description of the risk factors are consistent, and (f) whether the working capital statement is in line with the risk factors, the auditor’s report, the use of proceeds and the disclosed strategy of the issuer and how that strategy will be funded.

16.  Furthermore, in determining compliance, the FCA will consider whether a person has acted in accordance with the European Securities and Markets Authority Guidelines on risk factors (“ESMA guidelines”).[30] Those guidelines are addressed to competent authorities,[31] in this case the FCA, to assist them when reviewing the specificity, materiality and presentation of risks factors across categories depending on their nature.[32]

17.  Before approving the prospectus, the FCA should ensure that specificity of the risk factor is clear from the disclosure. In that regard, the FCA should challenge those responsible for the prospectus where the disclosure of a risk factor does not establish a clear and direct link between the risk factor and the issuer.[33]

18.  The FCA should challenge the inclusion of risk factors that only serve as disclaimers. Where necessary, the FCA should request amendment or a clearer explanation.[34]

19.  The FCA should also challenge the persons responsible for the prospectus where the potential negative impact of the risk factor on the issuer/guarantor and/or the securities is not disclosed and request appropriate amendments.[35]

20.  Where materiality is compromised by the inclusion of mitigating language, the FCA should challenge the inclusion of such language and where necessary, should request that the mitigating language is removed.[36]

21.  Before approving the prospectus, the FCA should ensure that the materiality and specificity of the risk factor is corroborated by the overall picture presented by the prospectus.[37]

22.  The presentation of risk factors across categories (depending on their nature) should aid investors in navigating the risk factors section. Before approving the prospectus, the FCA should ensure that risks factors are presented across categories based on their nature.[38] At paragraph 35 of the ESMA Guidelines, example categories of risks are provided including, ‘Environmental, social and governance risks’.

Obligations of SHEIN

23.  In order to be admitted to the official list, SHEIN must comply with FSMA and the UKLR. Among other things, SHEIN must submit listing particulars (likely a prospectus) to the FCA. These must contain all such information as investors and their professional advisers would reasonably require, and reasonably expect to find there, for the purpose of making an informed assessment of —(a) the assets and liabilities, financial position, profits and losses, and prospects of the issuer of the securities; and (b) the rights attaching to the securities.[39]

24.  SHEIN must take all reasonable care to ensure that any prospectus submitted for approval contains the necessary information under the Prospectus Regulation and the PR Regulation.[40] The presentation of risk is carefully controlled by these regulations.

25.  In particular, risk factors featured in a prospectus shall be limited to risks which are specific to the issuer and/or to the securities and which are material for taking an informed investment decision as corroborated by the content of the registration document and the securities note. When drafting the prospectus, the materiality of the risk factors based on the probability of their occurrence and the expected magnitude of their negative impact must be assessed.[41] Each risk factor shall be adequately described, explaining how it affects the issuer or the securities.

26.  Specific categories of ‘Risk Factors’ that are likely relevant to SHEIN and they must therefore detail in the prospectus are:

1. Regulatory Environment – which includes a description of the regulatory environment that the issuer operates in and that may materially affect its business, together with information regarding any governmental, economic, fiscal, monetary or political policies or factors that have or could materially affect the issuer’s operations, directly or indirectly. materially affected, or could materially affect, directly or indirectly, the issuer’s operations Annex 1 of the PR Regulation, relating to registration documents for equity securities refers to descriptions of the material risks that are specific to the user, in a limited number of categories, in a section headed ‘Risk Factors’.[42]
2. Board Practices – which includes statement as to whether or not the issuer complies with the corporate governance regime(s) applicable to the issuer, or an explanation as to why not; and potential material impacts on the corporate governance, including future changes in the board and committees composition, once decided by the board or shareholders.[43]

27.  SHEIN must also provide the FCA any information and explanations requested and must take reasonable care to ensure that any information it notifies to a Regulatory Information Service or makes available through the FCA is not misleading, false or deceptive and does not omit anything likely to affect the import of the information.[44]

28.  Once admitted to the official list, SHEIN must also comply with the ‘Listing Principles’,[45] including:

●        taking reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations (Principle 1).

●        dealing with the FCA in an open and cooperative manner (Principle 2).

●        acting with integrity towards the holders and potential holders of its listed securities (Principle 4).

29.  Listing Principle 1 is intended to ensure that listed companies have adequate procedures, systems and controls to enable them to comply with their obligations under the listing rules, disclosure requirements, transparency rules and corporate governance rules, and directors must take reasonable steps to ensure such governance arrangements are in place and maintained.[46] One such arrangement is for the timely and accurate disclosure of information to the market.[47] A listed company must be able to explain where information is held and how it can be accessed easily in the UK even where it is held overseas.[48]

Obligations of SHEIN’s advisors

30.  Under the recently introduced anti-greenwashing provisions in the Environmental, Social and Governance sourcebook (“ESG sourcebook”), authorised firms[49] must ensure that when they communicate with a client in the UK in relation to securities in SHEIN the sustainability characteristics of a product or service is:

1. consistent with the sustainability characteristics of the product or service; and
2. fair, clear and not misleading.[50]

31.  ‘Sustainability characteristics’ are defined in the FCA Handbook glossary as ‘environmental or social characteristics’. The ESG sourcebook could also apply to firms communicating or authorising financial promotions relating to SHEIN’s securities.

Anticipated breaches

Integrity Objective

32.  There are numerous credible reports of indicators of forced labour[51] in SHEIN’s supplier factories in China, including:

●        Excessive overtime – workers are forced to work long hours in breach of Chinese labour laws either to meet deadlines or to be able to earn a living wage. Reports refer to individuals working up to 18 hours a day with one or no days off a month or with wages docked if workers take time off. It appears that many workers are not entitled to base rate pay, with payment per item only and the per item rate linked to the overall number of items completed each day, thereby in effect forcing workers into working long hours;[52]

●        Abuse of vulnerability – workers are often migrants who live and work far away from home and are unable to return home due to long working hours. There are also reports of the use of child labour and of the use of cotton sourced from China’s Xinjiang region, which therefore have a high likelihood of having been produced by Uyghurs who are forcibly detained and imprisoned by the Chinese state.[53]

●        Withholding of wages – reports suggest the first month’s wages are withheld and workers are fined or have their wages reduced (sometimes by up to three quarters of their daily rate) if items do not meet quality standards. In other instances workers reportedly have to work unpaid to perform alterations;[54] 

●        Abusive working and living conditions – workers in parts of SHEIN’s supply chain are reported to lack employment contracts and social security contributions. There are also reports of a lack of basic safety standards in the workplace, including fire safety with fire exists blocked and smoking in stairwells.[55]

33.  Although SHEIN has responded to allegations of forced labour in its supply chain,[56] follow-up reporting by the not-for-profit sector suggests many of these practices are continuing.[57]

34.  There are serious concerns that in approving the admission of SHEIN to the official list, the FCA will enable the UK financial system to be used for a purpose connected with handling the proceeds of crime, contrary to the integrity objective.

35.  This is because when SHEIN’s products are made using forced labour, such that an offence was committed in China or would have been committed under the Modern Slavery Act if the acts took place in the UK, Shein’s products could be considered criminal property.

36.  Persons that enter into an arrangement which is known or suspected to facilitate the acquisition, retention, use or control of that criminal property by or on behalf of another person could be committing an offence under POCA. Defences to such crimes largely apply to transactions under £1,000, which would not apply to numerous investors and others trading in SHEIN securities. 

37.  In the interests of preventing financial crime, the FCA should refuse SHEIN’s application to list.

Transparency, consistency and accurate reporting of risk

38.  The approval of SHEIN’s listing particulars (likely a prospectus) will breach the FCA’s statutory and regulatory duties if it is not sufficiently comprehensive and consistent with the risks adequately and accurately elaborated.

39.  While SHEIN’s prospectus is not yet public, we raise the following questions based on publicly available information to date.

Is the prospectus comprehensive?

40.  There are persistent concerns reported about the lack of transparency regarding the nature of SHEIN’s operations. Specifically, there are credible reports of a lack of transparency of key governance issues relating to SHEIN, such as whether its founder and former CEO has been removed and why, the true nature of its corporate structure, as well as a distinct lack of transparency concerning its supply chain, most notably who its suppliers are.[58] Without this information about the supply chain, it is difficult to independently verify SHEIN’s claims concerning compliance with its policies but also raises questions as to whether the FCA can determine if risks relating to SHEIN’s supply chain are sufficiently and accurately explained.

Is the prospectus consistent?

41.  There must be consistency between the description of the issuer’s activity and the description of the risk factors. Reporting examining SHEIN’s response to concerns about forced labour has highlighted inconsistencies between SHEIN’s account of its activities and the findings of independent investigations.[59] This raises concerns as to whether the prospectus will be consistent and adequately specifies and demonstrates the link between risks and SHEIN.

Are all risks adequately and accurately elaborated?

42.  The FCA cannot comply with its consumer protection objective and its statutory and regulatory duties if the risks of investing in SHEIN are not adequately elaborated in the listing particulars (likely a prospectus). Based on public reports, the following risks should, at a minimum be elaborated upon in the prospectus, most likely in a section on environmental, social and governance risks:

1. Forced labour in the supply chain – based on credible reports available and outlined above, there would appear to be ubiquitous breaches of Chinese labour law in SHEIN’s supply chain. To the extent that practices taking place abroad amount to an offence under the UK Modern Slavery Act, there may also be more widespread implications for SHEIN’s advisors under POCA (see above, paragraphs 32-37). 
2. Infringement of intellectual property rights – the lack of oversight of SHEIN’s supply chain and the use of algorithms to pick designs that are trending well, appears to result in frequent infringements of intellectual property rights of independent designers and SHEIN’s competitors.[60] The Financial Times has reported that at least 93 different designers and companies have filed lawsuits in US federal courts against SHEIN for alleged copyright or trademark infringement since 2018, including at least 30 new cases filed in 2023.[61] In June 2024 SHEIN was sued in the UK for copyright and design right infringement by Oh Polly and its sister brand Bo&Tee.[62] Lawsuits have also been reported in Hong Kong and Japan. One business that sued SHEIN described them in a legal filing as “repeat counterfeiters” in light of SHEIN’s seeming willingness to agree settlements only to continue infringing.[63]
3. Use and presence of hazardous chemicals – in November 2022 Greenpeace Germany reported that of 47 SHEIN products they tested, 7 contained hazardous chemicals in excess of EU regulatory limits.[64] In 5 of those products the hazardous chemical was 100 times the requirements in the EU REACH regulation.[65] A total of 13 of the products (28%) contained hazardous chemicals at levels of concern. Testing of SHEIN products has also taken place in Canada and France, which also confirmed hazardous levels of chemicals, including other breaches of REACH.[66] In August 2024 authorities in South Korea found SHEIN products with significantly high levels of hazardous chemicals, including a pair of shoes with levels of phthalates 229 times above the legal limit, caps with formaldehyde, and nail polish with dioxane and methanol over the permitted limit.[67]

In addition to the potential breach of national laws, there are the risks of personal injury claims being brought by workers exposed to hazardous chemicals and environmental claims based on air and water pollution near factories handling SHEIN products.

While SHEIN has published a Restricted Substances List for suppliers,[68] the nature of their supply chain likely makes it extremely difficult to verify compliance.

4. Poor sustainability – there are many that believe that SHEIN embodies a particularly aggressive form of fast fashion that is unsustainable for people and planet. SHEIN has been persistently accused of using “dark patterns” to force consumers into actions they may not choose for themselves, most notably to purchase items when persons would otherwise not or far beyond what is needed.[69] These and other practices fuel waste, including by encouraging single use of items and telling customers they can keep products they wish to return.[70] Those that are returned are likely to end up in landfill because it is more costly to put them back into circulation. There is also limited resale value in the second-hand market.[71]

SHEIN prides itself on delivering orders to purchasers in short time scales. In addition to placing immense pressure on workers, it therefore relies almost exclusively on air freight with a high carbon footprint to transport products from producers, predominantly in China around the globe, including to Europe and the United States.

SHEIN’s products are mostly made of plastic. 60% of its women’s clothes were reportedly made of polyester with many other products made of materials derived from petroleum.[72] In an article by GreenMatch, it was stated that, “Most SHEIN clothes are made from non-biodegradable synthetics, lasting in the environment for hundreds to thousands of years, contributing to landfill waste and microplastic pollution.[73]”

The fast fashion model, particularly the model that SHEIN operates, is environmentally unsustainable and may face regulatory restrictions at the international or national level.

5. Greenwashing – statements made by SHEIN that could amount to greenwashing are set out below in the context of ESG rules applying to authorised firms (paras.47-55). While the ESG Sourcebook may not apply to SHEIN itself, there are other ESG provisions in the UK (e.g. the Green Claims Code and the MSA transparency in supply chain provisions) and elsewhere that are likely to apply to SHEIN. Risks of non-compliance must therefore be clearly elaborated in the prospectus. Furthermore, to the extent that the prospectus perpetuates false claims about the company’s environmental and social credentials, it would be inconsistent and inaccurate. 

43.  Mitigating language must not be used to compromise the materiality of these or any other risks and the FCA must ensure any such language is removed. SHEIN must also not talk in generic terms about risks or use the risk section as a disclaimer but must establish a clear direct link between the risk factor and SHEIN. The implications of these risks for SHEIN but also for SHEIN’s shares and its guarantor must be disclosed.

44.  In addition, this section on risk must inform the remainder of the prospectus, including the overall picture presented. Where the FCA is unclear about any of the risks relating to SHEIN, particularly as elaborated above, it should exercise its powers to request further information and must take into account all appropriate information, including for example this letter, representations from other organisations and reports in the media. If the regulations relating to the prospectus are not complied with the FCA cannot approve the prospectus.

Anti-greenwashing requirements

45.  We understand that SHEIN’s bankers reportedly include JP Morgan, Goldman Sachs, and Morgan Stanley. All three banks are FCA-authorised firms. To the extent that these banks and any other FCA-authorised firms are communicating about SHEIN’s securities, they risk enforcement action if what they say about the sustainability characteristics of the product are inaccurate or misleading or if they are not fair or clear.

46.  SHEIN have made numerous statements on sustainability, particularly in relation to forced labour, environmental impacts, hazardous chemicals, and intellectual property infringement.

47.  For example, their Sustainability and Social Impact Report 2023 states “SHEIN strictly prohibits child labor and forced labor.” (p.22) SHEIN’s website highlights “Equitable empowerment” and its dedication to fair working conditions under the heading “Improving lives in communities”, stating:

“we strive to not only improve the lives of those in the communities we reach and operate in, but also ensure we remain accountable to our network of suppliers…

“SHEIN is fully committed to managing our supply chain responsibly, and to supporting our suppliers in providing working conditions that meet international standards...

“At SHEIN, we aim to empower our different stakeholder communities with the tools, capabilities and funding to improve and change lives, whether in their personal or professional capacity...

“Through these mechanisms, we enforce stringent requirements on suppliers of SHEIN-branded products to comply with health and safety, labor and social welfare, and environmental standards, as well as applicable laws and regulations.​” [74]

48.  As set out above, there are credible and persistent reports of indicators of forced labour in SHEIN’s supplier factories, including practices that are in breach of Chinese labour laws (paras.32-33). Many of these practices appear to be as a direct result of the pressure imposed on suppliers by SHEIN’s short turnaround times, low prices and the failure to effectively audit its supply chain. Claims by SHEIN and its advisors to the contrary could therefore amount to greenwashing and for authorised firms breach ESG Sourcebook rules.

49.  In relation to greenhouse gas emissions, sustainable materials and waste reduction SHEIN states on their website:

“We’re using our disruptive mindset to drive positive change in fashion and beyond by rapidly testing and scaling sustainable innovations”.[75]

“We are committed to continually improving our processes to reduce waste and enable a circular future”.[76]

“By adopting an innovative on-demand business model, SHEIN strives to minimize production waste from the start”.[77]

“We are committed to using materials with a lower environmental impact and preferred performance properties that meet high quality and safety standards to protect both people and the planet”.[78]

“We use preferred materials with a lower carbon footprint, such as recycled polyester in place of virgin polyester fibers”.[79]

50.  Repeating these claims could amount to greenwashing by authorised firms. As set out above, SHEIN’s business model relies on encouraging high volumes of sales of fashion items made from materials that are predominantly produced from petroleum and are air-freighted to customers (para.42.d). Far from striving to ensure environmentally friendly practices and low carbon products, SHEIN uses “dark patterns” to encourage the single-use of products and the purchase of products that are not needed.[80] Spending money on eye-catching initiatives does not alter the fundamental business model and the harmful environmental and human impacts that flow from that model.[81]

51.  In relation to the use of hazardous chemicals, SHEIN states:

“At SHEIN, we are building compliance control processes that uphold chemical and physical safety standards.”​[82]

“Before being listed for sale, SHEIN-branded children’s clothing must also undergo several safety risk assessments to ensure that relevant standards for hazardous substance control are met. The design and production of SHEIN-branded children’s clothing are governed by our Children’s Clothing Safety Standards — an internal document that takes guidance from European standards[83].”

52.  As referenced above, there have been credible reports from NGOs and regulators about hazardous materials in SHEIN products (para.42.c). While SHEIN may have a policy in place that requires suppliers to carry out such testing, there is insufficient oversight of the supply chain to state that products are free from hazardous chemicals without risking breaching the ESG sourcebook.

53.  On the infringement of Intellectual Property rights SHEIN states:

“As we ask others to respect our intellectual property rights, we respect the intellectual property rights of others[84].”

“we strive to avoid infringement[85]”.

“We recognize the importance of intellectual property (IP) protection and our role in upholding these standards.”[86]

54.  The volume of intellectual property claims brought against SHEIN, as noted above (para. 42.b) and the lack of oversight of its supply chain highlight the likelihood that any such statement by an authorised firm attesting to SHEIN’s respect for others’ intellectual property rights would likely fall foul of the ESG sourcebook rules.

55.  There appears to be a clear discrepancy between the sustainability characteristics advanced by SHEIN and the reality. Any FCA-authorised firm cannot perpetuate any greenwashing to their clients in relation to securities in SHEIN or financial promotions of such securities. Where such greenwashing takes place, the FCA will need to take appropriate enforcement action. The risks potentially faced by authorised forms in this respect should therefore be borne in mind by the FCA when considering whether to approve SHEIN’s prospectus and application to list.

Secondary Objective

56.  To the extent that the FCA decides that approving SHEIN’s prospectus and admitting SHEIN to the official list supports its secondary objective - of facilitating international competitiveness of the UK economy and its medium to long term growth – it can only do so to the extent that those acts align with international standards.

57.  Based on the above, the FCA should take into account international standards on forced labour, including the ILO’s indicators of forced labour, the Stockholm Convention on Persistent Organic Pollutants 2001, the REACH Regulation, the TRIPS Agreement 1994 and the Paris Agreement on Climate Change 2016.

Conclusion

58.  We set out above the reasons why the FCA cannot admit SHEIN to the official list and why if it were to do so it would likely be in breach of its statutory and regulatory duties under FSMA and the UKLR.

59.  To the extent that the FCA disagrees, the FCA should exercise its discretion to refuse to list SHEIN on the basis that it would be detrimental to the interests of investors and on the basis that it is likely that SHEIN’s activities do not align with international standards.

60.  We ask the FCA to carefully consider the concerns and failings identified above before making any decision to approve SHEIN’s prospectus or admit SHEIN to the official list.

61.  All our client’s rights are reserved, including the right to commence proceedings against the FCA for judicial review of any decision it ultimately makes.

62.  Please acknowledge receipt.

Yours faithfully,

Goodenough Ring Solicitors

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