Non-US companies are not anticipating much success in stepping up pressure on the US to contain the reach of sweeping corporate governance legislation.
The Securities and Exchange Commission (SEC), the US's chief financial regulator, has until August 29th to implement a legal requirement that senior company executives attest to the accuracy of their financial statements or face penalties.
Non-US companies whose shares are listed in the US are covered by the law, a provision that has alarmed foreign companies anxious to avoid increased costs of compliance with new regulations. Governments, companies and unions in Europe and Japan have also voiced concern over the US extending its jurisdiction.
The first wave of company certifications, of the largest 700 US companies, are due in tomorrow but legal experts say it is far from clear if the SEC can later grant exemptions to non-US companies.
Mr Jacob Frenkel, a former enforcement lawyer at the SEC and an expert on the agency's use of US laws to regulate overseas companies, said the SEC had become increasingly aggressive in recent years in its "extraterritorial" enforcement actions.
"Those companies that are under the misimpression the SEC is too busy or may not pay attention to foreign issuers are kidding themselves," Mr Frenkel said.
Senator Paul Sarbanes, the primary author of the legislation, fought against efforts to exempt foreign groups from the new law, arguing that it would encourage US companies to move offshore.
The SEC has some discretion in drawing up its rules to enforce the certification law but a separate requirement forcing chief executives and finance officers to certify financial statements is less discretionary.
The SEC has already stated its intention to include foreign companies when it draws up the rules but it is soliciting comments.
The British government has been reassuring companies over the reach of the law, but officials say they are confident the burden will be lifted only for accountancy firms.
The European Commission is likely to meet US authorities to discuss the new rules.
According to the SEC website, by 8.45a.m. yesterday 161 chief executives had certified the accuracy of their financial statements, out of the 700 who must do so by 5 p.m. tomorrow.
- (Financial Times Service)
