Strategy

U.K. Regulator Allays Sarbox Worries

For companies listed on the London Stock Exchange, Nasdaq's 24 percent stake in the LSE has raised concerns over Sarbanes-Oxley compliance.
Stephen TaubJune 12, 2006

An acquisition of the London Stock Exchange by a U.S. suitor would not automatically subject its member companies to stringent U.S. regulations such as the Sarbanes-Oxley Act, the U.K.’s regulatory watchdog has reportedly stated.

The issue has become more than theoretical. In March, the Nasdaq Stock Market made a $4.2 billion takeover bid for the London exchange, which was immediately rebuffed; Nasdaq has since made three purchases of LSE shares, bringing its stake to 24 percent.

Callum McCarthy, chairman of Britain’s Financial Services Authority, stated that the FSA and the Securities and Exchange Commission agree that U.S. ownership of the LSE would not “in and of itself” mean that U.S. regulations would apply to LSE-listed or -quoted companies, according to MarketWatch.

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McCarthy reportedly conceded, however, that down the road, a buyer may try to merge rules governing membership and listing. “Theoretically, in the longer term, a new entity might seek to achieve further benefits from rationalization of its regulatory structure,” he said, according to the BBC News website. “This could at the extreme involve the LSE no longer being subject to U.K. regulation. Its services might be provided from outside the U.K., either from the U.S., another E.U. member state, or an alternative location.”

Noted McCarthy, “If such a market were to be operated from the U.S., it would require member firms and issuers to be registered with the SEC and subject to its oversight.”

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