Ministers are refusing to change the rules governing stock listings for mining companies, leaving some MPs warning that future "bad apples" could damage the FTSE 100's reputation.
Business minister Jenny Willott's appearance before MPs this morning raised questions about whether the government is doing enough to protect the FTSE from controversial mining firms like Eurasian Natural Resources Corporation (ENRC), which is currently being investigated by the Serious Fraud Office (SFO).
She told the Commons' business, innovation and skills committee that while current listing requirements do not cover a company's record on environmental and social issues, Britain's corporate governance rules provide the public oversight needed.
The FTSE 100 has much weaker listing requirements than exchanges in other countries like South Africa, where the Johannesburg stock exchange hosts a number of major mining firms.
MPs on the committee, who visited South Africa as part of their inquiry in February, have established some companies are choosing to list in London in order to avoid the stricter regulations in South Africa.
Chair Adrian Bailey suggested this effectively meant the FTSE 100 was being used as a "loophole" by companies wishing to avoid the stricter requirements of the Johannesburg exchange.
MPs are split over the issue as the committee begins work on its report on the extractive industries.
Some are content with Willott's argument that recent changes to listing rules by the Financial Conduct Authority (FCA) regulator, combined with the imminent introduction of the EU's transparency and accountability directive, will fix the problem.
But others disagree. Ann McKechin told Willott: "The point is whether you stop these companies being listed in the first place, and then you stop the reputational risk to the UK of having bad apples... Prevention is better than cure."
Willott replied: "I completely understand the concerns the committee have.
"What I'm saying is under the British set-up we have the social and environmental factors covered not through listings rules but through the corporate governance side of things.
"We feel that provides the transparency and the information needed to hold these companies to account."
Her position was defended by Conservative MP Robin Walker, who before entering politics worked in the mining sector.
"There is a huge amount of detail in most companies' listing particulars about the environmental and social aspects which were being discussed," he said.
ENRC, a relatively obscure company whose major players operate in Kazakhstan, was only on the FTSE 100 for two years before it faced a probe from the SFO.
It is being investigated on suspicion of corruption in Kazakhstan and Africa. The Africa Progress Panel has alleged its mining deals have cost the Democratic Republic of Congo a total of $725 million.
McKechin told Politics.co.uk afterwards the minister had attempted to "obfuscate" by drawing attention away from the listing regulations, however, when these were what had failed.
"If we've had a couple of quite serious examples which should cause us concern, you need to go back to the regulations and say 'are they robust enough?'" she insisted.
MPs are likely to highlight concerns around conflicts of interest which can arise when a new entrant on to the FTSE 100 is sponsored by another company.
"When there are conflicts of interest, it is the responsibility of the sponsor company to have in place appropriate policies to identify when there are potential conflicts of interest, and policies to identify how they would then tackle it," Willott said.
"Those are monitored by the FCA reasonably closely to make sure companies do have those policies in place."
Efforts to ensure more transparency in the mining sector have been given a boost by Britain's decision to sign up to the Extractive Industries Transparency Initiative (EITI), a global organisation encouraging national governments to be more open about their dealings with the industry.
The UK played a leading role in setting up the EITI but resisted joining it, on the basis that it was primarily for developing countries. That has now changed, following a campaign by Walker and ex-Labour MP Eric Joyce to accept Britain can wield more influence as a signatory.
"The government came to the conclusion we would be much more effective in taking a lead by signing up to it ourselves, and that would help us encourage other countries to sign up as well," Willott explained.
Its chair, former international development secretary Clare Short, told the Ecologist last December that it was not yet clear whether it was making a difference, however.
"The evidence that it has led to greater accountability and improvement management of the resources for the benefit of the people is not proven," she admitted.
"It's only been operational for a few years - it takes time to set up an international board, set up rules, get countries in the process, etc. But it has helped to entrench an expectation of transparency in a sector where murky hiddenness was the norm. That's no small thing."