Recasts with details and context from paragraph 5

By Kirstin Ridley and Phoebe Seers

LONDON, July 15 (Reuters) - Britain's Financial Conduct Authority is keeping tabs on U.S. arbitrage firm Litani's cut-price offer to snap up small investors' shares in London-listed insurer Aviva AV.L, the regulator's head said on Wednesday.

Nikhil Rathi, the FCA's chief executive, told lawmakers on the Treasury Committee that the watchdog would assess whether the law was being followed and ensure any communications to shareholders were fair and clear.

Aviva, which has a vast retail shareholder base, has urged investors to reject Litani's "mini-tender" for a limited number of shares at a steep 17.5% discount to the market price, noting this was not in investors' best interests.

"Offers like this ... typically involve buying shares at a lower price and then selling them on at the full market price, allowing the buyer to make a profit at shareholders' expense," the insurer warned in a message posted on its website on Tuesday.

Aviva declined to comment further. Legal representatives for Litani did not immediately respond to a request for comment.

"AVOWEDLY COMMERCIAL" APPROACH

London's High Court last December dismissed Aviva's application to block Litani from accessing its shareholder register because its contact was not for a "proper purpose".

Although Litani's approach was "avowedly commercial", mini-tender offers were not unlawful or subject to specific regulatory control, the judge ruled.

But he noted that Delaware-incorporated Litani had chosen to reveal nothing substantial about its identity, ultimate ownership or the identity of its directors and officers, that it had no website and its address in London was a co-working space.

Rathi said on Wednesday that he recognised that not all parties had welcomed that decision, adding: "But ... any communications that goes to those shareholders must be fair and clear and we'll be keeping an eye on it."

Litani made a similar tender offer to UK resident shareholders in Canadian-incorporated Sun Life Financial Inc SLF.TO in July 2024. More than 580 shareholders accepted the offer and only one complained, the 2025 London judgment showed.