Sarbox boosts stock exchange flotations

A reluctance to grapple with the onerous corporate governance rules in the US may have contributed to the London Stock Exchange's best month for flotations in four years.

June saw 15 IPOs on the LSE’s main market raising £1.9bn, the highest value since July 2001. But as well as the attractions of liquidity on UK markets, some companies are choosing London because of regulation that is much less burdensome than in the US and its now infamous Sarbanes-Oxley Act.

Martin Graham, director of the LSE’s market services, said that ‘Sarbanes-Oxley has undoubtedly assisted our efforts’, and emphasised the market’s ability to draw new listings from foreign companies.

‘We have also been promoting the advantages of a London listing more aggressively in our key target markets of China, Russia and India over the last 12 months, and are starting to see the fruits of this effort with a good flow of international companies joining both the Main Market and AIM.’

The views follow a torrid time for Sarbox. Last week, congressman Michael Oxley, one of the main architects of the act, confessed he believed that some of the reforms in the legislation were ‘excessive’.

That came just two days after a senior US judge attacked the act saying that it could soon raise company costs to a level at which they outweigh any potential benefits.

That blow was preceded by news at the beginning of the month that the Rank Group could delist from Nasdaq. The company revealed that the costs of its US listing had reached £2.1m a year, more than half of which went toward paying audit fees associated with Sarbanes-Oxley regulation.