US over-reaction to corporate financial scandals could have a domino affect across the Atlantic unless UK plc directors are vigilant, one of Birmingham's most senior lawyers will warn.

Speaking at an Institute of Directors' seminar on corporate governance today, Chris Rawstron, office managing partner of global law firm DLA Piper Rudnick Gray Cary in Birmingham, will say the Sarbanes Oxley legislation introduced in the US in 2002 has already had a knock-on effect on UK financial markets.

Responding to a lecture from Sir Derek Higgs, author of the Higgs Report on corporate governance in the UK, he will tell delegates that UK plc needs to regulate itself or the alternative could be stifling legislation that could cripple innovation and restrict access to capital.

"Events over the last two to three years in the US have discredited the axiom that anything and everything American is not only good but the very best.

"Until the introduction of Sarbanes Oxley the US capital markets were the most liquid and efficient in the world. Sarbanes Oxley was a knee jerk reaction on the part of the US Congress to outlaw conduct which was already illegal under existing US laws.

"It's one size fits all approach to regulation stifles innovation, risk taking, creativity and competitiveness. Worst still - or better depending on your perspective - it has resulted in a loss of foreign listings on US exchanges and diverted US IPOs to foreign exchanges," he said.

He will add that, worryingly, this had resulted in US exchanges acquiring interests in overseas exchanges.