UK: Sarbanes-Oxley Act – New Certification Rules Adopted
Last Updated: 16 September 2002

At an open meeting in Washington, D.C. last week the US Securities and Exchange Commission (SEC) adopted new rules required under the Sarbanes-Oxley Act relating to the certification of periodic reports, according to international law firm Freshfields Bruckhaus Deringer.

These regulations are the first of many which the Act requires the SEC to promulgate over the next 11 months or so, including rules relating to obligations of publicly held companies, their executives and attorneys and other subjects.

"The requirements to certify annual reports impose significant new personal liability on CEOs and CFOs of non-US companies filing annual reports on Form 20-F," said Thomas Joyce, partner, Freshfields Bruckhaus Deringer. "The rules do, however, treat non-US companies differently from US ones in that they only require certifications from officers of non-US companies on an annual basis, while officers of US companies must certify their reports quarterly as well as annually."

"Taking into account Congress’ intent in passing the Act, the SEC thought it was appropriate to extend the certification requirements to officers of these non-US companies. In fact, the wording of the Act gave the SEC little room to exempt these companies from the certification requirements," he said.

"The SEC has authority to exempt non-US companies from some, but not all, of the Act’s provisions. There may be considerable debate in coming months over the degree to which non-US companies should be held to the Act’s requirements," Joyce added.

The new rules supersede a certification proposal that the SEC made in June, before the Act was passed. The June proposal would have exempted CEOs and CFOs of non-US companies from the certification requirement.

The new rules require CEOs and CFOs of the approximately 1,200 non-US companies that file annual reports on Form 20-F to certify those annual reports, including the accuracy of financial statements.

The certifying officers also have to attest to the soundness of their companies’ "disclosure controls and procedures" (an issuer’s internal controls that are designed to ensure compliance with SEC disclosure requirements).

The SEC’s staff made it clear at the open meeting that for each annual report, similar but separate certifications would be required from both the CEO and CFO under sections 302 and 906 of the Act. Section 906 of the Act imposes severe criminal liability on CEOs and CFOs for false certifications, including up to 20 years in prison.


For more information contact: Tom Joyce, Partner T +44 20 7832/7372 or Anna Mitchell, Head of Public Relations T +44 20 7936/4000

Notes for editors

Freshfields Bruckhaus Deringer is a leading international law firm. With 506 partners and more than 2400 lawyers in 29 offices around the world, it provides a comprehensive worldwide service to national and multinational corporations, financial institutions and governments.

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