Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Tuesday, December 20, 2005

Suddenly it really IS Christmas

Especially for those foreign issuers that have been wanting to extract themselves from illiquid ADR programmes, and have found that their reporting commitment is forever.

The SEC is consulting on changes, under which US regulators last week proposed that foreign companies with New York and NASDAQ stock market listings be able to more easily end potentially expensive financial reporting obligations in the US.

This change comes against a background of growing transatlantic reporting harmony. In April, FASB and the IASB agreed that all major projects going forward would be conducted jointly. At the same time, the Securities and Exchange Commission said that, as soon as 2007, it might allow foreign companies to use IFRS to raise capital in the United States, eliminating the current requirement that they reconcile their statements to U.S. GAAP. And an early visitor when the new reporting changes were proposed was….the Chairman of CESR, in some minds the future European SEC.

Under the SEC plans, a ‘well known, seasoned issuer’ would be able to terminate its registration with the regulator, and the associated reporting obligations, if trading in its shares in the US was less than 5% and US investors held no more than 10 per cent of its stock.

The proposed deregistration tests represent a significant easing of the existing rules, under which a company would potentially have to continue filing annual reports with the SEC forever, or unless they have fewer than 300 US investors.

European companies and their associations such as the CBI have been concerned by the reporting costs resulting from Sarbanes-Oxley, having discovered that even if they scrapped their US listings they might be saddled with reporting obligations with the SEC indefinitely.

Watch this space for more transatlantic harmony.

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