FSA Responds To Treasury Announcement On Recognised Exchanges

by Robin Pilgrim, LawAndTax-News.com, London

19 September 2006

The UK's Financial Services Authority last week commented on the announcement made by the Economic Secretary to the Treasury, Ed Balls, regarding the decision to grant the regulator new powers.

Mr Balls announced on Wednesday that the Government is to legislate to enhance the Financial Services Authority's powers in relation to recognised exchanges.

The FSA will be given the power to veto rule changes proposed by recognised exchanges that would be disproportionate.

Speaking to the Hong Kong General Chamber of Commerce and the British Chamber of Commerce, in Hong Kong, Mr Balls explained that:

"This legislation will confer a new and specific power on the FSA to veto rule changes proposed by exchanges that would be disproportionate in their impact on the pivotal economic role that exchanges play in the UK and EU economies."

"It will outlaw the imposition of any rules that might endanger the light touch, risk based regulatory regime that underpins London's success."

"Nothing in this legislation has any consequence for the nationality of the ownership of UK exchanges. It will neither make overseas ownership easier or more difficult. We remain open to overseas investment that will continue to be able to benefit from our regulatory regime."

The new legislation has come about as a result of concerns expressed to the Government about the effects of a possible takeover of the London Stock Exchange by a company based outside the UK on the LSE's rules, in particular the rules applying to those companies whose securities are traded on the LSE's markets.

Commenting on the proposed change, the Financial Services Authority stated that:

"The FSA has been consulted by HMT, on its plans to make legislative changes, and is supportive of the proposed approach. The new provisions will provide confidence to UK markets and stakeholders that foreign ownership will not undermine the essence of the UK regulatory regime."

It concluded:

"The FSA remains indifferent to the nationality of the ownership of the entities it regulates."

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