Insurance Sector Calls For Regulation Of LSE To Stay In UK

by Robin Pilgrim, LawAndTax-News.com, London

22 February 2005

In a letter sent to Deutsche Boerse and Euronext, the London Stock Exchange's two potential suitors, the Association of British Insurers argued that whichever bourse is successful in its bid to buy the LSE, the exchange should continue to be regulated in the UK.

This follows the publication earlier this month by the Financial Services Authority (FSA) of a statement urging consideration of the regulatory implications of an overseas takeover of the UK exchange.

In the ABI's letter, signed by director of investment affairs, Peter Montagnon, the Association stressed its belief that: "One of the most important reasons why the London market is the largest and most liquid in Europe is the contribution made by the regulatory environment."

"Confidence in UK equities has been enhanced over the years by the operation of the Listing Regime, including the class transaction tests which give investors a vote on larger transactions, of the Takeover Code which offers a consensual approach to takeovers while ensuring the protection of minority investors, and of the market abuse regime which in our view cannot be operated satisfactorily at a distance."

"In addition, a number of our members operate client mandates, which oblige them to invest in UK-listed companies. Eligibility criteria for some major UK market indices are defined in terms of the geographical location of listing, and users of those indices could potentially be severely impacted by significant changes in listing arrangements."

It therefore went on to add that:

"For these reasons, our members have concluded that, although they have no view about the nationality of the owner of the London Stock Exchange, it is of paramount importance that the Exchange remains subject to UK regulation as a Recognised Investment Exchange. Any transfer of its activities to another jurisdiction, which jeopardised the confidence engendered by the current regulatory arrangements, would be a serious setback whenever it occurred."

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