William Donaldson, chairman of the Securities and Exchange Commission (SEC), said in London on Tuesday that the commission was considering tweaking some rules for overseas companies listed in the US, after an outpouring of foreign criticism of the Sarbanes-Oxley Act.
Donaldson said that the SEC was also considering making it easier for foreign companies to delist from exchanges in the US, and that it planned to consider requiring fewer years of past financial statements that comply with US accounting principles.
The agency would also consider pushing back the deadline for foreign companies to comply with the Sarbanes-Oxley rules on internal controls, Donaldson said. At present, that deadline is the next annual report that comes after April 15 of this year.
The SEC "remains committed to a level playing field for all its issuers, foreign and domestic alike," Donaldson said in a speech before several hundred business executives and students at the London School of Economics.
"But we recognize that cross-border listings frequently entail issuers having to navigate duplicative or even contradictory regulations," he said.
The SEC's willingness to consider any changes is the first sign that some concessions might be made for foreign companies whose shares are listed in the US. Since the Sarbanes-Oxley Act was passed in 2002, some overseas companies have been trying to delist from American stock markets and others have chosen to list elsewhere because they say the expense of complying with the law's rules outweighs the benefits.
As a consequence, US delisting rules have come under fire. According to a rule that dates back decades, companies with 300 shareholders or more in the US cannot delist their shares from the exchange where they trade. Consequently, they need to comply with Sarbanes-Oxley.
"US federal securities laws and regulations on this issue were designed many years ago," Donaldson noted, and should be revised to "preserve investor protection without inappropriately designing the US capital market as one with no exit."
The SEC is weighing whether there should be a "new approach" for foreign issuers that want to delist, he said.
In addition, the SEC is rethinking how it treats companies listed in Europe that must convert to the EU's new international foreign reporting standards. Donaldson said he expected the SEC to look at a proposal to allow those using the new European standards to reconcile just two years of financial statements to US accounting principles, instead of three.
Donaldson, however, defended the Sarbanes-Oxley Act, comparing US listing standards to those of the Marine Corps: both, he said, are "the best of the best."