CBI29 November 2002 Mr Jonathan.G. Katz,
Dear Sir SEC consultation on proposed rules regarding disclosures required by Sections 404, 406 and 407 of the Sarbanes-Oxley Act of 2002 The CBI is the leading UK business association for UK and other companies carrying on business here. Most UK companies with listings in the United States are members of the CBI. CBI member companies with listings in the US wish to make the application to them of Sarbanes-Oxley as practical and workable as possible, having regard to the fact that they are incorporated under, and are subject to, the laws of the UK and have primary listing obligations under the FSA Listing Rules. The requirements of UK law and securities regulations sometimes impose different and conflicting requirements to the proposed SEC rules. We therefore suggest that the SEC rules should permit UK companies to make their internal control disclosures in the same format and with the same content as required by these UK laws and regulations. Listed companies in the UK are subject to a strict internal control regime set and monitored by the UK's Combined Code on Corporate Governance (published in 1998) and the Financial Services Authority's Listing Rules. The Turnbull Committee issued detailed rules and guidance on this regime in 1999. These rules require companies to review the wider aspects of internal control and risk exposure, and to make statements in their annual reports about them. We would request that the disclosures made by UK companies to comply with the UK Listing Rules in support of the Combined Code disclosures should be regarded as sufficient compliance by UK companies listed in the US for the purposes of Section 404. The proposed requirements for financial experts on audit committees under Section 407 are very onerous for non-US companies. We consider that it would be rare for such companies to be able to appoint a financial expert with the required expertise, and they would therefore have to take the alternative course of setting out the reasons why they do not have one.
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