Sarbanes-Oxley is one American creation the British are taking pains not to import. UK Economic Secretary to the Treasury Ed Balls made that point clear when he recently proposed granting new powers to Britain’s financial regulator, the Financial Services Authority. In an effort to preserve Britain’s regulatory authority, the new legislation would enable the regulator to veto any major rule changes proposed by stock exchanges.
Given the New York Stock Exchange’s pending $10 billion merger with European exchange operator Euronext and Nasdaq’s purchase of a 25.3 percent stake in the London Stock Exchange, many in London’s financial markets are concerned that Sarbanes-Oxley could make its way across the Atlantic.
“The government’s interest in this area is specific and clear: to safeguard the light touch and proportionate regulatory regime that has made London a magnet for international business,” Balls said in a September speech at the Hong Kong General Chamber of Commerce. He has, however, rejected the idea of an outright ban on foreign ownership of the LSE.
Officials at the NYSE and Nasdaq have met with British authorities to confirm that they have no plans to bring Sarbox to England. But the exchanges are not the target of British regulators’ concerns. “The question is whether [U.S.] legislation, current or future, will mandate that companies on any American-owned exchange must follow Sarbanes-Oxley,” says Julian Franks, professor of finance at London Business School.
Parliament has put the proposal on the fast track by attaching it to an existing bill, and the change could become law within a year. For U.S. companies listing overseas to avoid Sarbox, the added protection can’t come soon enough.