Post by jannikki on Sept 16, 2006 15:39:10 GMT -4
Ex-SEC chief hits out at UK 'turf protection'
Financial Times
Updated: 1:42 a.m. ET Sept 16, 2006
A former head of the US regulator that oversees the implementation of controversial Sarbanes-Oxley rules on Friday criticised the UK's plans for a law that would help protect the City of London from unwanted US regulations as "unilateral turf-protecting".
Harvey Pitt, former chairman of the Securities and Exchange Commission, said draft legislation that would protect UK-listed companies in the event of a takeover of the London Stock Exchange by Nasdaq was "throwing down the gauntlet" to other jurisdictions at a time when what was needed was "international diplomacy and co-operation".
Known as the Balls Clause after Ed Balls, UK economic secretary to the Treasury, the proposed legislation aims to preserve the UK's light-touch rule book should US legislators become determined to harmonise securities law on an offshore exchange with their own.
Mr Pitt said Mr Balls was "operating out of good and proper motivations".
But he told the Financial Times: "What we need now is not unilateral turf-protecting activity but really collaborative discussions between regulators to figure out what the right solutions are to protect investors."
While many in the US business community accept that Sarbanes-Oxley went too far, Mr Pitt's comments reflect concern that fears about US regulatory "creep" abroad should be handled through closer co-operation between regulators.
The SEC and FSA have in recent months stepped up co-operation on this issue, prompted by the proposed merger between the New York Stock Exchange and Euronext.
Yet in the City there remain concerns that US-style regulations could still find their way to Britain.
In the US, there are already worries that unilateral attempts by jurisdictions to protect their own turf could prompt immediate retaliation by foreign regulators.
This would undermine recent co-operation between regulators and stifle exchanges' attempts to expand businesses abroad, some participants say.
Such fears have been stoked by a debate launched in recent months by the US futures industry regulator, the Commodity Futures Trading Commission (CFTC).
It is studying whether it should redefine what is meant by a "foreign futures exchange" in light of the existence in London of an energy futures exchange owned by ICE, a US-based operator, regulated by the FSA yet offering contracts in the US that are not regulated by the CFTC.
"The US cannot expect to regulate the operations of foreign exchanges without a reactive regulatory response against US exchanges doing business in foreign jurisdictions," Craig Donohue, the Chicago Mercantile Exchange chief executive, wrote in a recent letter to the CFTC.
Other industry observers said it was understandable that the UK might want to legislate to protect the City against the knock-on effect of future actions by Congress, given the unexpectedly rapid passage of "Sox" in 2002.
But some questioned the move.
Susan Milligan, senior vice-president and special counsel at the Options Clearing Corporation, said: "They seem to have a lot of time on their hands worrying about passing rules to deal with situations that haven't even been thought of here, let alone have gone through our arcane and time-consuming legislative process."
Copyright The Financial Times Ltd. All rights reserved.
www.msnbc.msn.com/id/14855822/
Financial Times
Updated: 1:42 a.m. ET Sept 16, 2006
A former head of the US regulator that oversees the implementation of controversial Sarbanes-Oxley rules on Friday criticised the UK's plans for a law that would help protect the City of London from unwanted US regulations as "unilateral turf-protecting".
Harvey Pitt, former chairman of the Securities and Exchange Commission, said draft legislation that would protect UK-listed companies in the event of a takeover of the London Stock Exchange by Nasdaq was "throwing down the gauntlet" to other jurisdictions at a time when what was needed was "international diplomacy and co-operation".
Known as the Balls Clause after Ed Balls, UK economic secretary to the Treasury, the proposed legislation aims to preserve the UK's light-touch rule book should US legislators become determined to harmonise securities law on an offshore exchange with their own.
Mr Pitt said Mr Balls was "operating out of good and proper motivations".
But he told the Financial Times: "What we need now is not unilateral turf-protecting activity but really collaborative discussions between regulators to figure out what the right solutions are to protect investors."
While many in the US business community accept that Sarbanes-Oxley went too far, Mr Pitt's comments reflect concern that fears about US regulatory "creep" abroad should be handled through closer co-operation between regulators.
The SEC and FSA have in recent months stepped up co-operation on this issue, prompted by the proposed merger between the New York Stock Exchange and Euronext.
Yet in the City there remain concerns that US-style regulations could still find their way to Britain.
In the US, there are already worries that unilateral attempts by jurisdictions to protect their own turf could prompt immediate retaliation by foreign regulators.
This would undermine recent co-operation between regulators and stifle exchanges' attempts to expand businesses abroad, some participants say.
Such fears have been stoked by a debate launched in recent months by the US futures industry regulator, the Commodity Futures Trading Commission (CFTC).
It is studying whether it should redefine what is meant by a "foreign futures exchange" in light of the existence in London of an energy futures exchange owned by ICE, a US-based operator, regulated by the FSA yet offering contracts in the US that are not regulated by the CFTC.
"The US cannot expect to regulate the operations of foreign exchanges without a reactive regulatory response against US exchanges doing business in foreign jurisdictions," Craig Donohue, the Chicago Mercantile Exchange chief executive, wrote in a recent letter to the CFTC.
Other industry observers said it was understandable that the UK might want to legislate to protect the City against the knock-on effect of future actions by Congress, given the unexpectedly rapid passage of "Sox" in 2002.
But some questioned the move.
Susan Milligan, senior vice-president and special counsel at the Options Clearing Corporation, said: "They seem to have a lot of time on their hands worrying about passing rules to deal with situations that haven't even been thought of here, let alone have gone through our arcane and time-consuming legislative process."
Copyright The Financial Times Ltd. All rights reserved.
www.msnbc.msn.com/id/14855822/