UPDATE 1-Britain's FCA presses ahead with 'Aramco' listing rule

(Releads, adds detail of changes to proposed rules)

LONDON, June 8 (Reuters) - Britain's markets watchdog will press ahead with a new premium listing next month aimed at attracting companies like state-controlled Saudi Aramco to London, although the new rules have been tightened following criticism.

The Financial Conduct Authority's proposal last year led to suggestions the British government had influenced the watchdog to try to secure the Saudi energy company's listing.

Saudi Arabia is expected to float up to 5 percent in Aramco in Riyadh and an international venue such as London or New York in what is expected to be the biggest initial public offering ever and would boost the reputation of its chosen listing venue.

Britain is keen to promote London's leading position as a financial center as the country leaves the European Union but British lawmakers had asked the FCA if the original proposal for sovereign-controlled firms could weaken investor protection.

Major investors also criticized the plans when they were first circulated in July last year.

"The FCA thinks there is considerable benefit to investors if corporate issuers agree to meet these additional premium requirements," the watchdog said in a statement accompanying an 83-page document outlining the new rules on Friday.

The FCA said it had made some changes following feedback, including the requirement that the election of independent directors be subject to approval from independent shareholders.

There would also be a requirement for "timely disclosures" on transactions between the sovereign and the issuer.

But there will not be a requirement for a controlling shareholder agreement, and no need for an advance sponsor opinion or advance approval by independent shareholders of certain transactions with the sovereign or its associates.

"These rules mean when a sovereign controlled company lists here, investors can benefit from the protections offered by a premium listing," FCA Chief Executive Andrew Bailey said.

A premium listing in London would typically require a float of at least 25 percent of a company's shares, but the new category could allow a smaller float, the FCA said.

"Some very large companies can make a credible case for a liquid market at a free float of less than 25 percent," it said. (Reporting by Huw Jones Editing by Ben Martin and Alexander Smith)