SOX Center

Since the Sarbanes-Oxley Act was adopted in 2002, non-U.S. issuers have become increasingly disenchanted with the regulatory burden of being listed on a U.S. stock exchange or otherwise having SEC reporting obligations. The most significant reason for non-U.S. issuers wanting to terminate their U.S. obligations is to avoid the internal control requirements under section 404 of S-Ox. In response to criticism that the criteria for exiting the U.S. markets were too stringent, the SEC has adopted new rules to make it easier for these issuers to terminate their reporting obligations when there is relatively little interest in their securities among U.S. investors.

Under the new rules, foreign private issuers will generally be entitled to deregister with the SEC and cease reporting if, during a recent 12-month period, the average daily trading volume of their equity securities on U.S. stock exchanges is 5% or less of the worldwide average daily trading volume. Under the existing rule—to be eliminated for equity securities—a foreign private issuer may terminate its registration and cease filing reports with the SEC only if there are fewer than 300 U.S. resident holders. (Issuers who fail to satisfy the 5% trading test may still deregister if they have fewer than 300 holders.)

Mondaq: New Rules Make It Easier For Non-U.S. Issuers To Terminate Their SEC Reporting Obligations

The Securities and Exchange Commission today issued two releases to grant smaller public companies and many foreign private issuers further relief from compliance with Section 404 of the Sarbanes-Oxley Act of 2002.The subjects are:

1. Ref from Section 404 Compliance Dates for Smaller Companies (Non-Accelerated Filers).

The Commission is proposing to grant relief to smaller public companies by extending the date by which non-accelerated filers must start providing a report by management assessing the effectiveness of the company’s internal control over financial reporting. The initial compliance date for these companies would be moved from fiscal years ending on or after July 15, 2007, until fiscal years ending on or after Dec. 15, 2007.

2. Relief from Section 404(b) Compliance Date for Certain Foreign Private Issuers.

The Commission is granting relief from Section 404(b) compliance for foreign private issuers that are accelerated filers (but not large accelerated filers), and that file their annual reports on Form 20-F or 40-F. These companies will have their compliance deadline extended for an additional year, so that they will not begin complying with the Section 404(b) requirement to provide an auditor’s attestation report on internal control over financial reporting in their annual reports until fiscal years ending on or after July 15, 2007.

3. Proposed Transition Relief for Newly Public Companies.

In the same release in which it proposes an extension of the Section 404 compliance dates for non-accelerated filers, the Commission also proposes a transition period for newly public companies.

Here you will find the press release of the SEC.