SEC 'fact sheet' on exchange mergers

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The Independent Online

The Securities and Exchange Commission, Wall Street's financial regulator, has promised it will not extend its tentacles into Europe as a result of transatlantic stock exchange mergers.

The SEC put out a mollifying "fact sheet" about international exchange consolidation yesterday, as continental European objections mounted to the New York Stock Exchange's agreed takeover of Euronext.

Investors and company directors have raised concerns that the NYSE acquisition of Euronext, or a potential takeover of the London Stock Exchange by Nasdaq, could force UK companies to adopt the provisions of the draconian Sarbanes-Oxley legislation, introduced in the wake of the Enron fraud.

"Joint ownership of a US exchange and a non-US exchange would not result in automatic application of US securities regulation to the listing or trading activities of the non-US exchange," the SEC insisted yesterday. "Many forms of integration cited with regard to cross-border exchange mergers would not result in mandatory registration of a non-US exchange with the SEC. Those forms of integration also would not result in the mandatory registration of a non-US exchange's listed companies with the SEC or the mandatory compliance with the provisions of the federal securities laws, including the Sarbanes-Oxley Act."

Opponents of the NYSE-Euronext deal, who want a European deal between Euronext and Deutsche Börse, appear to have gained ground as the value of NYSE's bid has fallen to $9bn (£5bn).

The SEC's statement does, however, reserve the right to impose US regulation if the LSE or Euronext is not run at arms length from the US. That could be a significant hurdle to the sort of round-the-clock, round-the-world trading platform US acquirers hope to achieve in the long term. That echoes the warning of Callum McCarthy, the chairman of the UK's Financial Services Authority, who said earlier this week a complex regulatory situation could arise that would lead to LSE companies having to bow to Sarbanes-Oxley rules.