Sarbanes “net contributor to the nation's economic health” say Chairman Cox.

SOX has made great contributions to the US economic health, said Chairman Cox. CEO’s of the largest US companies, and the UK Government beg to differ.

One of the more controversial areas is in compliance with the internal-controls rules. The SOX package of corporate accounting reforms includes a requirement for public companies to review their internal controls over financial reports annually, subject to a second check by the firm's outside auditor. Critics say the requirement, already in effect for larger U.S. firms, has been costly and could crush smaller companies, which are still exempt from it.

However, Cox argued differently. In his testimony to a House committee this, he said that while complying with internal-controls requirement has been costlier than anticipated, it is producing significant benefits. He said he's "convinced that there are no irreparable problems" with that part of the 2002 law and officials are working on ways to make compliance more cost-effective. He assured lawmakers that the SEC has ample authority to make changes on its own and doesn't need Congress to revisit the law.

To do this, the SEC and the Public Company Accounting Oversight Board will issue guidance on internal-controls compliance in the first half of 2007. If that deadline is missed, they will give smaller companies another extension from complying with the law. Other exclusions will include some of the 1200 foreign private issuers that are accelerated filers. Approximately a quarter will receive the one-year extension of the compliance dates.

However other evidence suggests that CEO’s are not necessarily in agreement. According to a survey by the NYSE, CEOs are vocal regarding the downside of the regulation. Nearly half of U.S.-based businesses cited a spending increase of 100 percent or more over the past three years to comply with new regulations.

Compliance also takes a personal toll, CEOs say. Nearly all CEOs report that their job involves greater personal legal risk than it did three years ago. Nearly three out of four claim to spend more time reporting to the board, and almost 90 percent say they dedicate more time to regulatory issues.

And the headline story has often been the impact of SOX on the US markets of overseas companies to choose a US listing. Chairman Cox noted how remarkable it was that provisions of SOX are being adopted by overseas governments. Nonetheless, the UK Government acted this week to propose laws giving the Financial Services Authority powers to veto regulatory changes proposed by any new owner of the LSE.

So not everyone agrees with the roseate view of the benefits of SOX, advanced by Chairman Cox.

The Transparency Directive – what’s new?

With four months to go before the implementation of this new Directive, where have we got to and what does it mean for issuers?

In the UK, the FSA’s consultation feedback statement is expected anytime soon. This will be the outcome of the responses to the consultation held between March and June.

A key aspect is likely to be the timing of the periodic reporting obligations. Technically, the Directive is due for implementation on the 20th January 2007. However, a key debate has been over the date from which its obligations would arise. The Commission in Brussels has been keen to have a January 1st 2007 start date, meaning that companies with a calendar year end would be obliged to apply the new periodic reporting requirements almost immediately.

However with 60+% of UK Plc’s having a calendar year end, the FSA has been keen to push for the January 20th implementation, meaning that those companies would have until 2008 to comply. A Treasury announcement may be expected soon.

In another area, the FSA looks likely to offer a further consultation on the inclusion of contracts for difference as “material interests” for disclosure purposes. This would balance out the situation where under Takeover Panel rules, holdings of CFD’s must be disclosed, but not only the Disclosure Rules.

Meanwhile the European Commission has still not published its “level 2” language, which defines what national regulators have to enforce. This is likely to lead to the FSA rules being introduced as “near final” – allowing the possibility of change if needed. It may also be the reason for the lack of progress made in some European countries, where issuers are still unaware of the likely requirements.

Summer’s over – a new harvest of research on IR topics

During the summer months of 2006, while we (in theory at least) were relaxing, the research firms have been very busy investigating and analysing themes that impact our day jobs. Topics range from XBRL – which the SEC is determined will be adopted – to narrative reporting.

However, first lets look at MiFID. Sounds like a refugee from the John Wyndham novel? No. Among other things, the European Commission’s Market in Financial Instruments Directive has the potential to create new trading options for companies. A group of 10 banks is aiming to take on the LSE in creating a market for your equities. The banks are said to be taking advantage of MiFID, which no longer requires banks to report their trades to a local exchange - although they still have to report them somewhere. 2 consultations were launched this month, asking your opinion on all this.

Back to narrative reporting; PWC published an interesting study (only in German, sadly) with the provocative thesis that focus on long term corporate goals in investor communications brings more certainty and development opportunities for listed companies. The companies in question are Swiss, but the principle holds true for all. And according to another new study (from NYSE) rebuilding reputation is among the top concerns for CEO’s.

And the SEC’s introduction of rules on the disclosure of compensation plans for US executives, offers the prospect of measurable targets being required from US companies – which gives insight into their strategies, and perhaps restores transatlantic equilibrium after OFR.

Speaking of which, still more surveys now show that the earlier reporters in the year, are staying true to the requirements of OFR, even though they not strictly required. Whether this is because they were in the plan anyway (after all that preparation), or companies were influenced by the pension funds’ letters to their Chairmen, or simply that BR’s are not that different from OFR’s, is not clear.

And with the world focussed on climate change, the Worldwatch Institute – more research – has noted that while corporate sustainability reports are on the rise, many of them lack transparency, details, and long-term goals, making them of questionable value.

And so back to the SEC’s focus on “interactive data”. 2 announcements show how serious they are. Its annual Forum on Small Business Capital Formation will focus on the advantages filing interactive data with the SEC can give smaller public companies. So now all we need is some tools to analyse XBRL…… Enter the second SEC announcement – it has plans for its own Web tools that will let investors and analysts exploit interactive data to analyse mutual fund and corporate information.

So that’s the summer’s headline research – all we need now is time to read it.