- The Washington Times - Sunday, December 15, 2002

The names Sarbanes and Oxley are being begrudged all over Europe and Asia. That's because the Sarbanes-Oxley Act, which President Bush signed in July, lays down regulatory guidelines, not just for American companies, but for foreign companies that list in U.S. stock exchanges as well.
"There is such a thing as overreacting and overshooting the mark," said Frits Bolkestein, European commissioner for the single market, regarding the law's application to foreign companies. His comment is generally reflective of foreign perceptions of the law. In particular, Sarbanes-Oxley's requirement that chief executives and chief financial officers certify earnings and that auditing functions be segregated from consulting services have been bitterly criticized abroad. Also, the so-called noisy withdrawal provision, which requires corporate lawyers to drop their client and inform the Securities and Exchange Commission of their withdrawal if they come upon incriminating information, has also been quite unpopular.
Many U.S. companies are also less-than-enthusiastic about having to comply with stricter regulations. And, since the Sarbanes-Oxley Act sought to restore investor confidence in wake of the Enron and WorldCom implosions, it makes sense that, in the interest of uniformity, foreign companies that list on U.S. exchanges should follow the same rules as U.S. companies.
Some critics contend that foreign companies will choose to list elsewhere, say in London, to escape the law's (over)reach. The chairman of the New York Stock Exchange, Richard Grasso, for example, has pleaded this case. But attracting foreign issuers by weakening the laws that apply to them would be misguided.
And the SEC has broad discretion in deciding how the new regulatory rules should be written. It can make special provisions for foreign issuers, if foreign governments already have similar laws that would make complying with new U.S. regulations particularly burdensome or redundant. On Dec. 17, the SEC is holding two roundtable meetings with foreign regulators to discuss the application of the rules outside the United States. The Sarbanes-Oxley Act set a Jan. 26 deadline for the SEC to write new rules in six key areas, including auditor-independence and attorney-conduct rules.
Foreign executives, like U.S. executives, have brought up valid points about the potential impact of new regulations. Specifically, the new rules on attorney conduct seek to bolster accountability, but will also weaken client-attorney privilege a key element of the U.S. justice system. But foreign issuers shouldn't get blanket exemptions from the U.S. regulations even if the names Oxley and Sarbanes are taken in vain in Europe and beyond.

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