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Telekom Austria, Vernalis Plan to Delist From U.S. Exchanges

European companies are already signaling their intent to take advantage of a pending change in rules that will let them easily cancel U.S. stock listings and escape the regulatory constraints of the Securities and Exchange Commission and the Sarbanes-Oxley Act.

Telekom Austria AG and Vernalis PLC, a small Great Britain-based pharmaceuticals company, Tuesday said they plan to delist and deregister from U.S. markets when the rules change on June 4, saying the cost of listing outweighs any benefit. Earlier this month, European staffing giant Adecco SA announced similar plans.

Telekom Austria is listed on the New York Stock Exchange; Vernalis trades on Nasdaq. Both also trade in their respective home countries.

The moves come as U.S. financial officials, including Treasury Secretary Henry Paulson, grapple with what they see as the shrinking competitiveness of U.S. financial markets. Other stock exchanges, particularly in London and Hong Kong, are winning initial public offerings that previously might have gone to the NYSE or Nasdaq.

Yahoo!Finance: European Cos. Exit U.S. Exchanges

The European Union is satisfied with new U.S. rules making it easier for companies to delist from U.S. stock exchanges, European Internal Market Commissioner Charlie McCreevy said Friday. “The solution of the de-registration issue is a milestone” for transatlantic economic relations, McCreevy said. “This is very good news for our companies and economy.”

Under the SEC’s new rules, non-U.S. companies are free to leave U.S. markets for good if U.S. trading in their securities is 5% or less than worldwide trading in the same securities over the previous 12 months. The change is set to take effect mid-year, just in time for non-U.S. firms to escape the stringent accounting rules imposed by the 2002 Sarbanes-Oxley Act.

Morningstar.com: EU Says Satisfied With New US Stock Exchange Delisting Rules

The Securities and Exchange Commission will make it easier for foreign companies to delist from U.S. stock exchanges and withdraw from SEC oversight, including the requirements of the Sarbanes-Oxley law.

A new SEC regulation, approved today, will allow companies to deregister their shares if U.S. trading is 5 percent or less of the firm’s daily volume worldwide. The rules will take effect before a June deadline for complying with Sarbanes-Oxley’s audit requirements, regulators said.

Bloomberg: SEC to Allow Companies to Withdraw From U.S. Listings

On the heels of stronger-than-expected economic growth numbers and ahead of the Federal Reserve announcement on interest rates, President Bush on Wednesday told a Wall Street audience that a strong economy worthy of investors’ confidence requires free trade, business regulation that’s fair but not oppressive, and better transparency in terms of executive pay.

The president also commended the creation of Sarbanes-Oxley - a law passed in the wake of the Enron scandal to create more transparency in corporate accounting. But, he said, compliance with the law has proven very costly for companies and may discourage some from listing on stock exchanges.

“A strong economy rests on strong and flexible capital markets. … Excess litigation and over-regulation threaten to make our markets less attractive to investors. …. We need to change the way the law is implemented,” Bush said.

cnnMoney: Bush: Mind CEO pay, change how Sarbanes-Oxley works

Business has won the battle to ease one of the most controversial requirements mandated by the Sarbanes-Oxley corporate-reform law: that companies first review their own systems for ensuring accurate financial reports and then have them tested by outside auditors.

The nation’s business lobby, which says Sarbanes-Oxley is too burdensome, would like to see even broader changes in the law, which was passed in the wake of the Enron scandal to promote good corporate governance and prevent fraud. Democrats’ success in Tuesday’s congressional elections makes wholesale changes in the statute less likely.

But securities and accounting regulators are yielding to pressure for a more flexible reading of a provision of the law known as Section 404. Regulators have said they will propose guidance next month to help companies and auditors interpret Section 404 in a way likely to save them time and money.

That’s a big victory for business, which has mounted a concerted push to alter the regulation. It could also be good news for U.S. stock exchanges, which in recent years have blamed Sarbanes-Oxley, and particularly Section 404, for discouraging companies from going public in the U.S. or listing stock here.

Business Wins Easing of a Sarbanes-Oxley Rule