London keeps edge over Wall St for now

By Andrew Hurst

LONDON (Reuters) - Britain's flexible financial regulatory regime is giving London a strong edge over New York, especially in attracting foreign company listings, and there is no sign Wall Street can close the gap soon.

Speakers at a Reuters Investment Banking Summit singled out for praise Britain's principles-based system of market regulation, overseen by the Financial Services Authority (FSA), and were critical of what they said was intrusive regulation in the United States.

"The FSA has done well, but it has been helped by the fact that the Americans have made such a mess of it," said a senior investment banker who asked not to be identified. "There is a fine balance to be struck."

London's growing attractiveness at the expense of New York has led to soul-searching on Wall Street and fears that it may be losing its traditional pre-eminence as a global financial center.

The U.S. Sarbanes-Oxley law, adopted in 2002 after a wave of corporate accounting scandals culminating in the collapse of energy giant Enron, is thought by business leaders to put an excessive regulatory burden on companies.

"We have seen a lot of IPOs (initial public offerings) come to London, and there is recognition in the United States that the pendulum has maybe swung too far," said Jerry del Missier, a co-president at Barclays Capital in London.

BRITISH MINISTER DEFENDS LONDON APPROACH

British Treasury Minister Ed Balls said Britain's financial regulatory system was helping to draw business to London.

"We have a principles-based and a risk-based approach to regulation, which has proved to be effective ... we are determined to keep it that way," he told a meeting of securities regulators on Thursday.

High-profile investigations of investment banks and other financial businesses by New York State Attorney Eliot Spitzer have also influenced the investment climate.

"No CEO gets up (with the intention) to cheat someone. But when something goes wrong somewhere, you don't want to be accountable for that," said Viswas Raghavan at JP Morgan.

"You are getting people arrested at JFK (New York's airport) ... nobody wants that," he said.

London has been reaping the benefits. International listings have leapt on its Alternative Investment Market (AIM) with 96 foreign companies in the first nine months of this year.

"Certainly the results speak for themselves when you look at London versus New York. London has definitely gained," said del Missier. "The regulatory environment here is very balanced and is a strength of the markets vis-a-vis the United States."

European firms are thinking twice about listing stocks or bonds in New York because of the cost of complying with Sarbanes-Oxley.  Continued...