The US Securities and Exchange Commission has withdrawn the threat of legal sanctions against UK companies who fail to meet Sarbanes Oxley compliance - for the time-being.
The imminent implementation of the Sarbanes-Oxley Act led to the possibility of fines or even prison for company directors of foreign companies who were quoted on US markets. However, under pressure from lobbying organisations, such as the Confederation of British Industry, the SEC has announced that the deadline for compliance to Section 404 of the act had been extended from 15 July 2005 to 15 July 2006 - for foreign companies only.
European companies had been concerned that with the need for organisations to comply with European regulations such as BASEL II and the forthcoming UK Companies Act, as well as Sarbanes-Oxley, companies could find themselves stretched and had expressed concerns about the cost. "The CBI lobbied hard for extra time for European companies to deal with the demands of section 404 and we are pleased that the SEC has granted a meaningful extension," said Sir Digby Jones, director-general of the CBI.
According to an SEC spokesman, the lobbying could be over-stated. "We’ve always indicated that we would listen to concerns," he said. Kazim Isfahan, director of marketing for compliance software vendor, Business Engine, said that he was not surprised that the deadline had been moved. "Sarbanes-Oxley always had an aggressive deadline and has moved deadlines before."
But he did point out that a lot of the fuss would die away. "It’s a bit like offshore was the big issue last year. This year it’s the compliance mantra."
The image of pin-striped executives from the UK’s largest executives being led away in handcuffs might have stirred up feelings of schadenfreude in the wider community but such an outcome was always unlikely. "They would be in breach of compliance but we can’t say what the remedy would be," said the SEC spokesman. "It would depend on the circumstance and on what exchange the company was quoted on. Not least, it would depend on market reaction.”
So, we have to banish those thoughts of Britain's boardrooms bundled out the back with blankets over their heads for a while yet.
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