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EU/US : US-LISTED FIRMS ESCAPE HOTEL CALIFORNIA'.

The long-standing problem for European companies in deregistering from US capital markets is "largely resolved": this is the European Commission's view on new proposals announced on 14 February by the US Securities and Exchange Commission (SEC).

The clamour from European companies to be able easily to delist from US markets has grown hugely recently, since the passing of the Sarbanes-Oxley Act in 2002 put highly onerous reporting conditions on companies listed on American markets. However, under the 40-year-old US regulations on delisting, a non-US company, which is signed up with a US stock exchange, can only suspend its registration if it has fewer than just 300 US shareholders. If the number rises above 300, it is deemed to still be listed and has to comply with the consequent reporting duties: hence the Hotel California' sobriquet [you can check out, but you can never leave]. The SEC did come up with proposals to reform the system early in 2006, but the Commission felt these were insufficient to resolve the problem.

The new proposals, however, should do the job. They would make delisting easier by shifting the criteria from the number of shares to a comparison of the company's trading volume on the US market with its primary home market. The Commission welcomed the proposals but urged the SEC to increase the trading volume threshold from the proposed 5% to allow more EU companies to benefit from the new rule. It also asked the SEC to use the worldwide trading volume instead of the primary market trading volume, thus taking into account all markets where securities are traded.

In a letter commenting on the proposals, the Commission called on the SEC to have the new rules in place by 30 June 2007, which would allow many companies to avoid the Sarbanes-Oxley filing deadline.

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Publication:European Report
Article Type:Brief article
Geographic Code:4E
Date:Feb 15, 2007
Words:301
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