Stringent laws mean Wall Street 'could lose its edge'

Some of New York's most senior politicians combined forces yesterday to demand reforms to protect the city's finance industry from the growing threat posed by London and other markets.

A report commissioned by Mayor Michael Bloomberg demanded that companies be allowed to opt out of the onerous Sarbanes-Oxley legislation introduced in the wake of the Enron scandal, and demanded that immigration rules be relaxed to attract smart foreigners to work on Wall Street.

The report, by the management consulting firm McKinsey, also proposed limits on the blizzard of lawsuits that has snowed in many Wall Street firms and quoted companies. Intriguingly, its recommendation that legal disputes be settled by arbitration rather than litigation was endorsed by Eliot Spitzer, the newly-elected New York governor, whose time as attorney-general was characterised by multi-billion lawsuits against unethical practices on Wall Street.

Launching the report, Mr Bloomberg warned: "Unless we take corrective steps, and soon, we are going to lose New York's global leadership in financial transactions putting a chill on the economy of the nation and of the city, which will spell fewer jobs and slower overall growth."

London has been basking in its reputation for light-touch regulation, credited with attracted foreign companies to choose to list in the UK rather than in New York. But there has been a growing backlash on this side of the Atlantic against the Sarbanes-Oxley legislation. The Securities and Exchange Commission, Wall Street's regulator, has begun allowing a more relaxed interpretation of its rules on company audits, and the McKinsey report argued that smaller and foreign companies should be allowed to opt out.