10 August 2006

FT: US moves to ease Sarbox regulation

The US moved yesterday to address the loss of company listings abroad by proposing that foreign companies floating on US exchanges be given a year’s exemption from complying with the toughest part of the Sarbanes-Oxley laws. The Securities and Exchange Commission proposal was part of a package of measures, aimed at foreign and small to medium-sized US companies, deferring deadlines for complying with section 404 of the law. The section requires company executives to check internal controls and have outside auditors make additional checks. Executives complain that this has added to costs and tied up management. It has become a lightning rod for criticism of Sarbanes-Oxley, passed in 2002 in the wake of the Enron and WorldCom scandals.

Opponents of the law, which include US politicians and businesses on both sides of the Atlantic, blame section 404 for driving company listings abroad to London and Hong Kong. The SEC said companies considering US listings would not be required to file a management report or an auditors “attestation” report with the regulator until they had filed an annual report - in effect giving companies a year’s grace. John White, director of the SEC’s division of corporation finance, told the Financial Times: “Our goal here is to make it easier for foreign issuers to do IPOs in the US. They will still ultimately have to comply but won't have to worry about section 404 compliance as they worry about their IPO.”

Todd Malan, president of the Washington-based Organisation for International Investment, which represents foreign companies with US listings, said it was a step in the right direction. Other measures included giving foreign companies already listed and with a market capitalisation of under Dollar 700m (Pounds 367.4m) but more than Dollar 75m an extra year to comply with section 404.

© Financial Times