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Don’t blame regulators for the failure of London’s American Dream

When the UK proposed making directors responsible for approving internal controls over financial reporting, the reaction was furious.This was bad for business, city Grundy’s thunderedit would discourage good people from joining the board and bog the board down with the bureaucracy.

The proposal is modeled after the Sarbanes-Oxley Act of the United States, which works perfectly in the land of the free.But the British government retreated from ideas.

The United States is also home to so-called quarterly capitalism. This is so burdensome and short-termist that it was abolished as a UK requirement in 2014 to reduce the frequency of reporting. The hamster wheel of U.S. disclosure is overseen by the Securities and Exchange Commission, a notorious pushover backed by a nation of ferocious attorneys ready to drop class action lawsuits at every opportunity.

Yet companies such as chip designer arm, Cement Group’s CRH and Betting Group’s Flutter are now reluctant to enter this hostile environment, attracted by larger and more liquid capital pools that tend to value higher than the UK market. I am eager. The wrong answer is personal dissatisfaction Behind each transition rather than looking at the big picture.

Incidentally, whether intruders into the US will fare as well as domestic companies is an open question. Unlike FTSE, there is a great deal of discretion over who he is included as one of the “leaders” in his S&P 500 index. This requires not just being listed in the US, but also being considered a US company. Since 2018, the London Stock Exchange has seen a 37% decline in international IPOs (excluding special purpose acquisition companies) in the U.S. market where he has raised more than $100 million, while domestic listings have fallen by four. % increases.

But still they go. SoftBank’s decision to oppose Arm’s dual listing and favor a U.S.-only listing particularly biteIf SoftBank is eligible for the index, a simultaneous listing in London would have been worth it. The company reportedly did not want to sign rules for London’s ‘premium’ market segment, which is a condition of its participation in the FTSE 100. In particular, I didn’t like the related party transaction rules.

It’s not clear why these rules are such a headache for SoftBank, according to some city advisers. that there is a need. (The US variant is to disclose and allow anyone to sue you if they don’t like it). Wondering why this was such a roadblock, unless Masayoshi Son had a specific deal in mind?

Either way, pointing the finger seems brusque regulatorThe Financial Conduct Authority has already reviewed the requirements for Premium as part of the process of considering splitting Premium and Standard into one segment.Indeed, its original paper pretty confused; it’s moving more slowly than some people like. But last year’s initial regulatory survey found that most respondents saw value in protecting related parties, and few cited them as a barrier to listing. SoftBank’s exemption from market rules seems difficult to justify.

London has gone this route before, trying to get past New York and tweaking its rules to accommodate Saudi Aramco’s listing. That didn’t happen and the new sovereign category created within the Premium Listing Rules is not used. In any case, given that the latter decision was left to him by FTSE Russell, that shaming did not necessarily guarantee inclusion in the index.

The downside of listing in the US is the cost of doing business there. This was once the case in London. Updating the UK’s list and suite of governance rules is part of addressing it. We’re getting rid of the valuation discount partly caused by the failure. What it shouldn’t be is succumbing to the particular niggles of every major issuer for fear of going elsewhere.

@Helen Biz

https://www.ft.com/content/b5fbc43e-3af9-4641-8b2e-f85575a1132b Don’t blame regulators for the failure of London’s American Dream

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