Thursday, September 25

SOX - International Impact


International Impact of SOX
Foreign Private Issuers ("FPIs") registered on US Exchanges must comply with the Act in the same manner in which a US company does, with limited exceptions. The Act introduced additional requirements that many foreign companies did not anticipate when first deciding to enter US capital markets. As a result of these and other environmental changes, the direct and indirect costs of being an SEC registrant have increased and some foreign companies are reconsidering the US capital markets as a place to raise capital. Additionally, the PCAOB regulates the non-US auditors who have clients that are listed on an exchange in the US and registered with the SEC. This makes the non- US audit firms subject to the regulatory requirements, inspection process, and penalties dictated by the PCAOB.

In response to the increase compliance costs, in March 2007, the SEC finalized rules allowing Foreign Private Issuers to deregister with the SEC if they meet certain requirements.

A link to the final rules is provided (
http://www.sec.gov/rules/final/2007/34-55540.pdf)

Although many countries or territories do not have a Sarbanes-Oxley equivalent, many regulatory bodies and Exchanges are expanding their accounting, regulatory, and corporate governance standards in order to prevent large scale corporate scandals as those experienced in the US.

As a result of increased scrutiny by the regulators and investing public, company officials of multinational entities have stated that much of their time has been redirected from strategic business initiatives to matters of compliance. The amount of time and money spent globally on regulatory compliance has increased dramatically in recent years. The increased costs, however, have not gone without benefits. Companies have identified and corrected weaknesses in their internal controls over financial reporting which should improve the quality of the information they are providing to the market. This translates into more informed investors and increased trust in the capital markets

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