Tuesday, January 25, 2005
SEC poised to ease rules for foreign listings
The Securities and Exchange Commission is on Tuesday expected to signal a relaxation of registration requirements for foreign companies which want to escape US corporate governance rules.
William Donaldson, chairman of the US regulator, is due to give a speech at the London School of Economics indicating a "change of tone" on the question, according to an insider.
This follows lobbying by British and German business leaders concerned that foreign companies with shares traded in the US cannot avoid costs associated with the Sarbanes-Oxley reforms - even if they are willing to give up their US listing.
The main focus of their anger has been the act's Section 404, which requires managements to state, in year-end filings, the adequacy and effectiveness of internal controls.
International companies with US listings will have to meet these expensive requirements from from July 15 2005 onwards.
Several European companies said the high cost outweighed the benefits of maintaining a dual listing in New York, but delisting was pointless because the SEC still required compliance by any company with more than 300 US shareholders - a difficult threshold for any large company to avoid.
Though stressing the continued importance of Section 404 as a gold standard for investors, Mr Donaldson is now thought willing to compromise by providing an easier exit for foreign companies.
One insider said the SEC was anxious to address criticism that the New York Stock Exchange had become like a "roach motel" - a reference to a famous US advertisement for cockroach traps promising pests "can check in, but cannot check out".
The question has become increasingly sensitive for the NYSE because potential overseas clients claim Sarbanes-Oxley is deterring them from coming to the US.
posted by Brian Moran @ 8:51 AM