London-listed companies would be forced to file information with the US Securities & Exchange Commission if either Nasdaq or the NYSE took over the London Stock Exchange.
This is the conclusion of an analysis of the regulatory structure by leading US and UK lawyers, seen by The Independent on Sunday.
Nasdaq has already tabled a bid for 950p a share for the LSE. It met with leading investors last week to see what price they might accept for their stock. The NYSE is mulling whether to make a rival bid and could decide in the next few weeks.
To avoid regulatory problems, Nasdaq has said it would keep the LSE as a separate subsidiary in a holding company structure. This is the same model that it proposed when it made a bid approach three years ago, which foundered on worries about American regulators rolling their tanks into the City.
However, the UK's Financial Services Authority and the SEC put out a joint statement last week saying that they saw no regulatory obstacles to US and UK exchanges being owned by one company.
According to legal experts, though, the regulators have ignored wrinkles involving the two main US laws that cover this area - the Exchange Act and the Sarbanes-Oxley Act. These mean that to avoid having to register with the SEC, and so face a massively increased regulatory burden, UK-listed companies would have at least to file the same information they give to the FSA with the US regulator.
Any errors or omissions in this filing could leave directors of UK firms open to prosecution under Sarbanes-Oxley. This could mean imprisonment - a threat not present in the UK.
"The LSE benefits from companies which do not want to list in the US because of Sarbanes-Oxley," said a leading lawyer. "A lot of this advantage could disappear in a US takeover."Reuse content