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Eric Carlson
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Are We All Issuers Now?

For years, critics have said the FCPA hurts U.S. financial markets by scaring away foreign companies that don’t want the burden of compliance. We don’t know of any hard evidence to support that argument, and no foreign executives have told us they’re staying out of American markets because of the FCPA.

In fact, we view the NYSE-Deutsch Börse deal as evidence of more foreign interest in the U.S. stock exchanges, not less. Could that be because laws like the FCPA help protect the integrity of the American exchanges, which makes them more attractive to investors everywhere?

That’s right, according to NYC’s Mayor Bloomberg. Last week he said the merger will force European companies to switch to using U.S. accounting rules which have superior disclosures.

“This will force a common set of accounting standards on the world; the American disclosures are better,” Bloomberg said, even though, he added, they didn’t prevent the Madoff scandal.

How many companies trading on the Deutsch Börse will now want their securities to trade on the NYSE? That would require them to register the securities with the SEC, making them “issuers” and subject to both the antibribery and accounting provisions of the FCPA.

An “issuer” includes any entity “which has a class of securities registered pursuant to” Section 12(g) of the Securities Exchange Act of 1934 or “which is required to file reports under” Section 15(d) of the Securities Exchange Act. 15 U.S.C. §§ 78dd-1(a), 78c(a)(8), 781, 78o(d).

The FCPA’s accounting provisions require “issuers” to keep books and records that accurately and fairly reflect the transactions and dispositions of the assets of the company, and to have a system of internal accounting controls that keeps management in charge of the company’s assets. 

*     *     *

The NYSE’s merger with Germany’s Deutsch Börse has produced some memorable rhetoric and prose.

John C. Whitehead, the 88-year-old former co-chairman of Goldman Sachs said last week, “It would be an insult to New York City, and New York State, and indeed to all America. . . . I think of [the NYSE] as a holy institution.”

Gary Weiss of thestreet.com wrote this week:

The boards of the two exchanges approved the merger yesterday [February 15], which means an icon of American capitalism falls under non-U.S. control for the first time since traders gathered under a buttonwood tree in 1792. The combined German-American stock exchange company will be 60% owned by the Frankfurt borse, and 40% by NYSE-Euronext shareholders. In other words, we’ve become minority owners of our own financial heritage, such as it is — a fate that could not have been forced upon us by the Wehrmacht has been achieved, three generations later, voluntarily. Thank heavens, for their sake, that most of the World War II generation has died out.

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