SEC eases curbs on foreign firms

March 22, 2007|By Bloomberg News

WASHINGTON -- The Securities and Exchange Commission approved new regulations yesterday that will make it easier for foreign companies to delist from U.S. stock exchanges and withdraw from SEC oversight, including the requirements of the Sarbanes-Oxley law.

Trading threshold

The regulation will allow companies to delist their shares if U.S. trading is 5 percent or less of a 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 U.S. capital markets, said SEC Chairman Christopher Cox. "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 Inc. 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 U.S.

European regulators, including Charlie McCreevy, the European Union's financial services commissioner, have said earlier versions of the SEC's delisting rules made it too hard for overseas companies to leave, making the decision to register shares in the U.S. in the first place a risky one.

"This is very good news for trans-Atlantic relations and the trans-Atlantic financial regulatory dialogue," said Oliver Drewes, a spokesman for McCreevy. " ... It's a great step forward."

The SEC's move comes as U.S. regulators are debating ways to make domestic markets more competitive with their overseas rivals.

Sarbanes-Oxley

Executives and business groups blame Sarbanes-Oxley for a decline in U.S. stock-market listings. They say the law's costs have driven companies to less-regulated markets, such as the London stock exchange. U.S. companies spent an estimated $6 billion last year complying with Sarbanes-Oxley, according to AMR Research in Boston.

Twenty-nine percent of the 1,200 foreign companies regulated by the SEC will be eligible to pull their U.S. listings under the proposed rules, said John W. White, director of the SEC's Division of Corporation Finance.

"We think we have a combination of things coming together that will make listing in the U.S. more attractive," White said.

The SEC has revised its foreign-listing regulation twice since proposing it in 2005. In December, the agency proposed letting companies withdraw from its oversight if U.S. trading equaled 5 percent of daily buying and selling in the firm's home market.

SEC Commissioner Paul S. Atkins said, "We are remedying a problem that has been festering for decades."

Overseas companies that choose to pull their U.S. listing would have to disclose their plans to shareholders in a news release. The firms also will have to make future financial statements available in English over the Internet.

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