In a press statement released today, Callum McCarthy, Chairman of the Financial Services Authority (FSA), commented on the potential longer term implications of any change of ownership of the London Stock Exchange (LSE). He observed that the situation could occur where LSE member firms and issuers could become subject to the US's Securities and Exchange Commission. One of the SEC’s requirements is compliance with SOX, the Sarbanes-Oxley Act, which has been blames for large increases in external audit fees for US and non-US companies listed on US exchanges.
In the short term, McCarthy said "as long as it remains a UK exchange, the FSA will continue to require that it meets its regulatory obligations as set by us under the Financial Services and Markets Act". He went on to say that the Euronext Regulatory College, consisting of the national securities regulators of the UK, Belgium, France, the Netherlands and Portugal, is looking at the issues raised by the proposed merger between Euronext and the New York Stock Exchange, a transaction that impacts the FSA as it is responsible for supervising London’s LIFFE, owned by Euronext. He also added that he would expect the US's NASDAQ, now owner of 25.1% of the LSE, to make its intentions clear regarding the supervision of any possible merged exchange.
McCarthy observed that there was the possibility that new merged exchanges could seek future harmonisation of both trading platforms and regulatory structures. He said "Theoretically, in the longer term, a new entity might seek to achieve further benefits from rationalisation of its regulatory structure. This could at the extreme involve the LSE no longer being subject to UK regulation as a Recognised Investment Exchange. If such a market were to be operated from the US it would require member firms and issuers to be registered with the SEC and subject to its oversight."
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