Corporate Governance

The Role of Stock Exchanges in Corporate Governance: The Regulatory Role of For Profit Exchanges (Part 4)

By J. Robert Brown

We are discussing The Role of Stock Exchanges in Corporate Governance, a report issued by the OECD. 

The role of the stock exchanges varies considerably.  Some are little more than trading platforms, with regulatory requirements largely emanating from the government.  This even applies to listing decisions.  As the study describes:

• In Europe, in most cases, it is the capital market regulators, not exchanges, who have an upper hand in issuer regulation according to national and, in many cases, EU legislation.  For instance, in Poland, the company is required to submit a draft of the issue prospectus to the Polish Financial Supervision Authority, which has the authority of approving it (or not), even before the company submits an application for the admission of shares to the WSE Management Board.

In other cases, the authority is shared. 

• The responsibility for company listing in many other OECD member countries is shared between the stock exchange and the securities regulators. In France, for instance, while it is the Board of Directors of Euronext Paris that decides on the admission of financial instruments on its market, it consults with the Autorité des Marchés Financiers and seeks its observations before listing. Likewise, in Australia, the responsibility for listed companies' compliance with listing rules is shared between the ASX and the Australian Securities and Investments Commission (ASIC).

In short, the model used by the NYSE and Nasdaq where they have the exclusive authority to decide listing issues (but see Rule 10A-3 and possible Commission authority to delist if the exchanges do not enforce their audit committee rules) is not necessarily the only model employed by stock exchanges globally. 

Full post as published by The Race to the Bottom on September 16, 2009 (boomark / email).