Foreign cos opposed to SOX can deregister their shares
The US Securities and Exchange Commission voted to allow foreign companies that object to Sarbanes-Oxley regulations to withdraw from US oversight.
By Agencies |
WASHINGTON: The US Securities and Exchange Commission voted to allow foreign companies that object to Sarbanes-Oxley regulations to withdraw from US oversight. The new SEC regulation would let companies deregister their shares if US trading is 5% or less of the firm’s daily volume worldwide.
The rules will take effect before a June deadline for complying with Sarbanes-Oxley’s audit requirements, regulators said. “By changing the rule to make exit easier, we may well attract more interest” in US capital markets, SEC chairman Christopher Cox said on Wednesday after a commission meeting in Washington. “Markets that are more open presumably attract more people, not fewer.”
Congress passed the Sarbanes-Oxley Act, which requires executives to certify the accuracy of financial statements, in 2002 after accounting frauds at Enron Corp and WorldCom eroded investor confidence. Higher audit and legal costs stemming from the law have prompted foreign companies to reconsider the benefit of listing their shares in the US.
Twenty-nine per cent of the 1,200 foreign companies regulated by the SEC will be eligible to pull their US listings under the proposed rules, said John White, director of the SEC division of corporation finance. The SEC has tweaked its rule since proposing it in December.
At that time, the agency proposed letting companies withdraw from its oversight if US trading equalled 5% of daily buying and selling in the firm’s home market. “Companies thought it would be a fairer test to look at all of the trading volume,” Mr White said. “It seemed like a better idea.”
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Overseas companies that chose to pull their US listing would have to disclose their plans to shareholders in a press release. The firms would also have to make future financial statements available in English over the internet. Executives and business groups blame Sarbanes-Oxley for a decline in US stock-market listings, saying costs associated with the law have driven companies to less-regulated markets. US companies spent an estimated $6 billion last year complying with Sarbanes-Oxley. “We think we have a combination of things coming together that will make listing in the US more attractive,” Mr White said.
The SEC in December proposed recommendations that would make the law’s audit requirements cheaper and less time consuming by instructing management to focus on items most likely to cause financial misstatements.
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