Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Tuesday, May 23, 2006

SEC Commissioner Atkins in Paris

SEC Commissioner Paul Atkins spoke in Paris this week on "The SEC's Evolving Regulatory Role in an Increasingly Integrated World Economy." The text of his speech is here. In a speech that went on the defensive regarding Sarbanes-Oxley, he noted the tremendous cultural and economic relationship between the U.S. and Europe and discussed the impact of these factors on the development of capital markets in both places.

Specifically, Atkins discussed allegations that overzealous regulations in the U.S. are discouraging foreign investment. One firm, the UK's Cable & Wireless, is forcing its approximately 100,000 U.S. shareholders to dispose of their holdings so that the firm can terminate its registration of shares with the SEC. Current SEC rules allow an issuer to exit the registration system only if there are fewer than 300 shareholders of record.

As noted previously by this blog, there are also reports that many companies choose to list elsewhere to avoid onerous Sarbanes Oxley compliance. Atkins noted that "it is becoming increasingly plausible that this trend reflects, if not actual, then at least perceived inefficiencies in the American regulatory system." SOX 404 compliance costs have far exceeded initial estimates.

Atkins noted that foreign listings in the U.S. provide investors here with more choice, while allowing foreign issuers access to the deep capital markets here. The SEC has recognized that 404 may provide difficulties for foreign issuers and extended the compliance date for those issuers for another year (to the first fiscal year ending after July 15, 2006). The SEC remains committed to addressing concerns expressed by international -- as well as domestic -- issuers.

Atkins also discussed the convergence of US and EU accounting rules and the commitment of FASB and the IASB to continue to work toward convergence. He noted with concern suggestions that U.S. companies should reconcile their U.S. GAAP financials to IFRS.

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