Sunday, April 08, 2007

UK Minister Views US Securities Regulation Reform White Papers

The Minister for the UK financial sector believes that the three recent white papers on reforming US securities regulation merit close attention and vowed that the points they detail will be closely studied in the UK. In the view of Economic Secretary Ed Balls MP, the three reports are aimed at making the US regulatory framework for its capital markets more internationally competitive. In a speech at a recent real estate conference, he also mentioned that the UK has formed a High Level Group on Competitiveness, chaired by the Chancellor of the Exchequer.

The three reports are the Bloomberg/Schumer report, the report of the Committee on Capital Markets Regulation, and the Chamber of Commerce report on the Regulation of US Capital Markets.

While the three reports have different areas of focus, he noted, their unifying theme is the need to reform the way in which the internal control mandates of Section 404 of Sarbanes Oxley are implemented, and the linked issue of the high cost of excessive litigation within the US system. In his view, the UK's principles and risk-based regulation is the key to London's success and has proved to be highly effective, while being flexible and adapting to change. But he assured that market regulation is not a zero sum game and that integrated global financial markets will all benefit from the SEC’s ongoing efforts to lighten the burden of Section 404 internal controls reporting.

The senior official noted that both the Bloomberg/Schumer and the Chamber of Commerce reports focus on the importance of international cooperation, including recognition and adoption of international standards such as international accounting standards and Basel II, in promoting international competitiveness. The Minister said that the EU has worked hard to agree to a sensible roadmap towards ensuring continued acceptance of US accounting standards subject to an acceptable level of convergence with international standards by the end of next year. He emphasized that it is now up to the standard setters and regulators to deliver that roadmap and the necessary convergence.

As part of the work of the UK High Level Group, he noted, a working group is developing a proposal for an international center for financial regulation. In a changing global economy, he said, it is important to understand and explore the contribution efficient systems of financial regulation make to global growth. As financial markets integrate further, he sees a trend towards greater regulatory co-operation and mutual recognition.

The Center will be aimed at stimulating debate on these types of issues, analyzing trends and generating potential solutions. The Government has committed to making a contribution to the start up costs for the Center, which underlines its commitment to promoting world-class regulation in the UK.