Standards & Guidance
SEC eases regulatory burden on companies
The US Securities and Exchange Commission (SEC) has
voted in favour of easing regulatory requirements for companies listed on US
markets.
This comes amid concerns the notoriously stringent Sarbanes-Oxley (SOX)
regulation is discouraging overseas companies from listing in the US, and after
Hank Paulson, US Treasury secretary, called for a more principles-based
regulatory approach.
Among the revisions the SEC is proposing are moves to
make it simpler for foreign companies to de-list from the US market and
relaxations of the rules associated with Section 404 on internal of SOX. The SEC
acknowledged that non-US issuers currently may find it difficult to end their
Exchange Act registration and reporting obligations even though there may be
little interest in its shares among US investors. It is proposing a new
benchmark for companies to be able to delist based on a comparison of the volume
of shares traded in the US compared with their home market.
The editorial in the
Financial Times (FT, 15 December) called the SEC’s
decision the clearest sign yet that the US is serious about wanting to enhance
the competitiveness of its capital markets. The FT suggested there is now a real
sense of momentum building towards broader changes, and that it is vital lighter
regulation is accompanied by moves to enhance shareholder rights. FT’s Lombard agreed the balance between the bureaucratic
entanglement of a US listing and the benefits in terms of liquidity and access
to US investors is starting to level out.
The SEC has postponed further the date by which smaller
companies must comply with the internal reporting requirements laid out in
Section 404 of SOX. Reporting was due to begin for financial years ending on or
after 15 July but this has now been extended to 15 December. The SEC has also
proposed new interpretive guidance on SOX’s
internal control provisions. Christopher Cox, SEC chairman, said the guidance
should reduce compliance costs and help management fit their evaluation
procedures to their company’s circumstances.
Meanwhile, the Public
Company Accounting Oversight Board voted to propose a new auditing standard
on internal control over financial reporting, which would replace an existing
standard. The changes proposed include the removal of certain auditor
requirements which the PCAOB said were not required to achieve the intended
benefits. Consultation on the new standard ends 26 February.
The SEC has also made amendments to its proxy rules that
would allow companies to supply shareholders with proxy materials via the
internet.
Links
Securities and Exchange Commission
Financial Times
Interpretive Guidance on Internal
Control Provisions
Public Company Accounting Oversight Board
January, 2007 |
