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This week, Sarbanes-Oxley looks like being eased for two significant groups of firms, as the SEC said it was looking to delay the implementation date for small companies and at relaxing the rules preventing non-US companies delisting from US exchanges. However, regarding the Basel II Capital Accord in the US, the time available for implementation was eaten into as the regulators delayed the deadline for comment by approximately six weeks.
At the beginning of this week, Bloomberg reported that Commissioner Roel Campos said the SEC will recommend at a meeting on the 13th meeting that the deadline for small companies complying with Sarbanes-Oxley Section 404 will be delayed for a fifth time, probably a year. This will enable companies with market value of less than $75M to benefit from potential new changes to Sarbanes-Oxley.
The second concession given by the SEC last week was to make market exit easier for foreign companies to withdraw from US stock market listing and so escape the Sarbanes-Oxley compliance. Current rules require these companies to remain registered with the SEC even after delisting if they have more than 300 US shareholders. The new suggestion is that this will be based on a percentage of share trading volume based in the US, likely to be 5%. This is unlikely to effect large overseas companies but will benefit a large number of smaller foreign companies. Currently many of these companies are looking to change internal rules to debar US investors and so enable an escape from Sarbanes-Oxley.
However, against this news, Basel II plans in the US were complicated by a decision to extend the comment period on the US's Basel II implementation proposals to coincide with the modified Basel I (Basel 1A) smaller US banks proposals' 90 day comment period, which started this week. This gives the larger banks (the top 20 who are expected or have elected to comply with the full Basel II regulations) time to compare each proposal – and presumably allow the "elected" of the top 20 to revert to being "smaller banks" if they so wish. But it will also have the effect of delaying the decision date by about six weeks, a questionable decision given the current intention to parallel run Basel II from January 2008, nine months after the end of the comment period. This probably means yet another delay to Basel II plans in the US.
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