The Financial Reporting Council has vowed to shield the UK’s governance model
from European and US pressure to introduce legislated rules.
At CIMA’s annual conference last week, FRC chief executive Paul Boyle said:
‘We do not want the EU to pursue governance harmonisation to the point that the
UK approach is outlawed. We have a huge market where the system works,’ Boyle
Boyle’s comments came amid fears that pressure from the US could force the EU
into introducing prescriptive governance requirements.
David Devlin, president of FEE, the European Federation of Accountants, said
the pressure on the EU for tough governance created the risk that the body would
imitate the onerous Sarbanes-Oxley regulations of the US.
‘The EU should allow flexibility and avoid enforcing European-wide governance
when a code-driven approach is preferred,’ Devlin said.
Peter Montagnon, director of investment affairs at the Association of British
Insurers, said that any legislation on governance by the EU would stifle
business. Boyle went one step further, arguing that market forces were already
favouring UK governance over the burdens of Sarbanes-Oxley, with companies
preferring a listing in London to the US.
The New York Stock Exchange’s 2004 annual report showed that the exchange had
accepted 152 new companies, while data from Thomson Financial showed that the
LSE has already accepted 160 IPOs this year.
Many LSE listings have been sought by foreign groups, which have chosen
London over New York. South Korean retailer Lotte Shopping has listed on the
LSE, while groups from the former Soviet Union have flocked to the UK capital.
‘Listings in the US are down while the London Stock Exchange is doing well.
Market pressure is going to ease regulation in the US,’ Boyle said.
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