Friday, September 15, 2006

Harvey Pitt and the Economist: "UK Balls more show than substance”

Sorry, I can't help but go with an easy joke. Nonetheless, Jeremy Grant of the Financial Times ("Ex-SEC chief hits out at UK ‘turf protection’") is reporting that former SEC chairman Harvey Pitt has come out saying that the UK's proposed Balls Clause (see here, here and here--I do like this topic) smacks of “unilateral turf-protecting”. He says the UK is “throwing down the gauntlet” to other countries precisely when what is needed is “international diplomacy and co-operation”.

“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.”

Pitt left the SEC under a bit of a cloud (and when I say “bit of a cloud”, I mean “he got fired”), but he still carries quite a bit of clout in Washington. It's not like you're going to see the SEC publicly call the Brits a bunch of morons over this, so Pitt's comments are probably a proxy for more official sources and well in line with current SEC chairman Cox's thoughts on this.

Also this week, the Economist has an article (“Darned SOX”) saying that with the "widespread expectation that Sarbanes-Oxley will be toned down next year...Mr Balls' remarks look somewhat more opportunistic than confrontational..."


From the British perspective, the long arm of American regulation has reached across the Atlantic with distressing frequency lately. Financiers point to the extension of a rule about hedge-fund registration (later struck down in an American court) to British funds, which are already regulated by the FSA. The financial press campaigned around the fate of the “NatWest Three”, a group of British bankers extradited to Texas in July for the alleged abuse of the international banking system.


...[S]ome question whether Britain truly has the ability to fend off American regulation if there is an exchange merger. After all, global investment banks are already subject to the rules of both countries. This highlights the trouble with lines in the sand: sometimes the tide washes them

Yeah, no kidding. If the LSE was given the opportunity to make a lot of money from American investors by adopting Sarbanes-Oxley-like rules, would the UK FSA stand in the way? Particularly if Euronext/NYSE was doing the same? I seriously doubt it.

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