International Matters Addressed in SEC Fact Sheet, Enforcement Panel

June 16, 2006

FEI Summary

On June 16, 2006, the U.S. Securities and Exchange Commission (SEC) issued a press release containing a “Fact Sheet on Potential Cross-Border Exchange Mergers.” The fact sheet expresses the views of the staff of the SEC’s Office of International Affairs, Division of Market Regulation, and Division of Corporation Finance on conditions under which a foreign exchange involved in cross-border mergers with U.S. exchanges would become subject to U.S. regulation. 

The Fact Sheet appears to be in response to questions raised about regulatory implications of possible cross-border mergers being considered between U.S. and foreign exchanges, including but not limited to the New York Stock Exchange’s recent discussions with Euronext, and Nasdaq’s discussions with the London Stock Exchange (LSE).

Key points in the SEC’s fact sheet are:

• Joint ownership of a U.S. exchange and a non-US exchange would not result in automatic application of U.S. securities regulation to the listing or trading activities of the non-U.S. exchange.
   
• Whether a non-U.S. exchange, and thereby its listed companies, would be subject to U.S. registration depends upon a careful analysis of the activities of the non-U.S. exchange in the United States.
   
• The non-U.S. exchange would only become subject to U.S. securities laws if that exchange is operating within the U.S., not merely because it is affiliated with a U.S. exchange.
   

The theme of international considerations in the regulatory environment was also stressed during much of the discussion at the SEC’s June 14 Past Enforcement Directors Roundtable, as noted in FEI’s Section 404 blog.

Prepared June 16, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.org), Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion, unless specifically noted above.