Linklaters

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U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
E-mail address: rule-comments@sec.gov
Attention: Jonathan G. Katz, Secretary

November 28, 2002

Re: File No. S7-40-02
Disclosure Required by Sections 404, 406 and 407 of the Sarbanes-Oxley Act of 2002,
Release Nos. 33-8138; 34-46701

Ladies and Gentlemen:

We are submitting this letter in response to a special request of the US Securities and Exchange Commission (the "Commission" or "SEC") for comments in respect of the Commission's rule proposal (the "Proposal") regarding disclosure required by Sections 404, 406 and 407 of the Sarbanes-Oxley Act of 2002 (the "Act"). As we represent a large number of non-US companies and global financial institutions, and in response to the Commission's requests for input from non-US issuers, the focus of our comments will be on those aspects of the Proposal of concern for our non-US clients.

Section 407 of the Act requires an issuer to disclose whether its audit committee includes at least one "financial expert". Proposed Item 309 of Regulation S-K (identical to proposed Item 15(b) of Form 20-F) would require an issuer to disclose the number and names of the "financial experts" on its audit committee. The proposed rules define a "financial expert" as someone who has, through education and experience as a public accountant or auditor or a principal financial officer, controller, or principal accounting officer of a company that ... was required to file reports under the Exchange Act, or experience in one or more positions that involve the performance of similar functions ..., the following attributes:

• an understanding of generally accepted accounting principles and financial statements;

• experience applying such generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves that are generally comparable to the estimates, accruals and reserves, if any, used in the registrant's financial statements;

• experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the registrant's financial statements;

• experience with internal controls and procedures for financial reporting; and

• an understanding of audit committee functions.

A. The Commission Should Allow Separate Financial Experts for Local GAAP and US GAAP For Non-US Issuers

As proposed, the "financial expert" requirement suggests that the financial expert for non-US issuers must be well versed in both local GAAP and US GAAP in order to effectively fulfil his or her role on the audit committee. The Proposal states that the board of directors should consider, with respect to non-US issuers, the person's experience with generally accepted accounting principles used by the issuer as well as the reconciliation of financial statements with US GAAP.¹ This effectively mandates a requirement for expertise in home country and US GAAP. It will be significantly more difficult for non-US issuers to identify financial experts possessing such qualifications to serve on their audit committees than will be the case for US issuers. The Commission should address the adverse treatment of non-US issuers by permitting non-US issuers to appoint multiple financial experts, for example, one for local GAAP and another for US GAAP financial expertise, but who, taken together, meet the requirements for a "financial expert".

B. The Commission Should Allow an Extension for Implementing Section 407 for Non-US Issuers

In the Proposal, the Staff indicated that they were considering a transition period with respect to the appointment of a financial expert. If the Commission imposes such a transition period, it should take into account the disproportionate problem non-US issuers will have finding qualified financial experts. Non-US issuers will be required to identify individuals possessing the requisite local and US GAAP expertise, as outlined above. Even if the Commission addresses the adverse treatment of non-US issuers as compared to US issuers by allowing the financial expertise to vest in at least two persons, the US GAAP qualified individual would still need to have a sound understanding of local business practice, and perhaps language skills, to serve usefully on the audit committee. Accordingly, non-US issuers will effectively always be selecting financial experts from a more limited pool of applicants than US issuers. For these reasons, if the Commission should choose to implement a transition period, the transition period should be longer for non-US issuers.

* * *

We would be pleased to respond to any enquiries regarding this letter or our views on the Release generally. Please contact Edward Fleischman, Bill Hobbs or Peter Ruhlin in New York at 212-424-9000, or Brigid Rentoul, Jason Manketo, Cecil Quillen, Jennifer Schneck, Steve Thierbach or Larry Vranka in London on +44 20 7456 2000.

Very truly yours

Linklaters