Minister Says UK Will Legislate to Protect ``Light Touch'' Regulation

More evidence that securities regulation in the UK and the EU generally are diverging from US federal securities regulation can be gleaned from speech by UK Economic Secretary Ed Balls in which he said that the government would legislate to protect the light-touch, risk-based regulatory regime under which the London Stock Exchange and its members and issuers operate. Light touch financial regulation is a term of art in the UK. It envisions a test under which the first question is whether the new regulation is needed. If the regulation is found to be needed, then there must be assurances that it will be implemented in a sensitive and light touch manner. The British firmly believe that their system of light touch regulation gives the UK a huge competitive advantage in attracting capital.

It does not take a genius to figure out whose system is counterpoised to the light touch regime. Yes, it is the US. Mr. Balls, who is City Minister, proudly asserts that the UK correctly resisted pressure for heavy-handed responses to corporate scandals. The minister flatly stated that Sarbanes-Oxley would have been wrong for Britain. Instead, he emphasized that the UK crafted a measured, proportionate response.

The minister explained that the proposed legislation would 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 would also outlaw the imposition of any rules that might endanger the light touch, risk based regime that underpins UK market regulation. But the minister assured that nothing in the legislation would have any consequence for the nationality of the ownership of UK exchanges. It will neither make overseas ownership easier nor more difficult.