The government pledged on Wednesday (13 September) that, if the London Stock Exchange (LSE) passes into foreign ownership, the Financial Services Authority (FSA) will retain regulatory control over it.
During the past 18 months Euronext, Maquarie, Nasdaq and the New York Stock Exchange have expressed interest in acquiring the LSE.
Clifford Chance litigation and regulatory partner Simon Davis said: “Anybody sensible would be concerned that, if it did pass into foreign ownership, this would upset the delicate balance between protecting investors and the market operating nimbly. The main risk is that overseas ownership might bring regulatory baggage tailored to another market.”
When Nasdaq made a bid for the LSE in March, there were fears that Sarbanes-Oxley regulations would be brought to London, should the junior New York market be successful. It was not, but it is allowed to try again in October. By that time the FSA’s new powers should be in place.
Martyn Hopper, a litigation partner at Herbert Smith and formerly an in-house lawyer at the FSA, said: “London is at a competitive advantage over other markets, particularly those in the US, because of what could be termed the ‘big black boots approach’ in America. Rightly or wrongly there’s the sense that UK regulation has a lighter, or at least a more sophisticated, touch.”
The news is seen as a clear sign that the Government would not stand in the way of a foreign takeover. Hopper said: “If this message was aimed at allaying some of those fears, then it’s probably worked.”
LSE shares jumped from 11p to £12.13 after the plans were announced.