This Week's Story: SEC may ease Sarbanes-Oxley rules.
This Week's Story:
SEC Considers Easing Rules On Foreign Companies
LONDON (AP) -- The U.S. Securities and Exchange Commission is considering softening new American corporate governance rules to ease the burden on foreign companies, its chairman said Jan. 25.
William Donaldson used a speech at the London School of Economics to outline some suggested concessions on the Sarbanes-Oxley Act, which some European companies have criticized as cumbersome and costly.
The Sarbanes-Oxley Act, which was passed by Congress two years after a series of corporate accounting scandals including the Enron affair, requires chief executives and chief financial officers to personally certify that their internal audit procedures are sound.
Due to come into force for European companies in mid-2005, it applies to U.S. and foreign companies whose stock is listed in the United States.
Companies in both Europe and the United States say the cost of requirements to prove the adequacy and effectiveness of internal controls each year will outweigh the benefits. European companies also argue that some of the regulations conflict with common European Union practice.
Donaldson said he had asked SEC staff to "consider whether to recommend that we delay the effective date of the internal control on financial reporting requirements for non-U.S. companies."
Under the current law, non-U.S. businesses have to file reports to the SEC six months after the close of their fiscal year.
The SEC has previously given some U.S. companies a filing extension, but Donaldson's comments mark the first time the SEC has floated the idea of relief for foreign companies.
European companies are particularly concerned that the high cost of the legislation will erode any benefits of a dual listing in New York.
They also have complained that the only solution to gain some relief -- delisting -- is pointless for most companies because the SEC still requires compliance by any company with more than 300 U.S. shareholders.
Donaldson said the SEC would consider "whether there should be a new approach to the de-registration process" for foreign companies unwilling to meet U.S. requirements.
Although the act does not provide exemptions for foreign businesses, the SEC would "continue to be sensitive to the need to accommodate foreign structures and requirements," he added.