19 August 2002
NYSE and NASDAQ post forms for listed companies to certify compliance with revised compensation committee listing standards
6 February 2014
8 August 2014
14 January 2014
11 November 2013
4 March 2014
The certifications were required pursuant to an order issued in late June by the US Securities and Exchange Commission (SEC). Senior executives of non-US companies traded publicly in the main US markets, however, now need to focus on their own certification requirements pursuant to the recently-passed Sarbanes-Oxley Act of 2002 (the act). These latter certifications will carry potential criminal liability and will represent an ongoing obligation. As both these certification requirements play themselves out in the markets, there will be plenty of scope for additional volatility.
Pursuant to the order, chief executive officers and chief financial officers of the 947 largest US companies must file one-time written certifications with the SEC, certifying the accuracy of their public filings, including financial statements. If they are unable to they must explain why. For the majority of these companies with fiscal years ending on 31 December, the deadline for filing the certifications was 14 August 2002.
Many senior executives chose to file their certifications before the deadline to reassure investors. Dozens were already listed on the SEC website at www.sec.gov prior to the deadline.
The order does not apply to non-US companies, even those making annual and interim filings with the SEC. So in the UK and Europe the order was primarily of interest in relation to 14 August and the likely market impact the certifications would have on US companies. Press accounts of the potential disruptive effect highlighted the US-only aspects of the order.
Under the act, the provisions of which are now coming to the attention of UK and European markets, senior executives of non-US companies whose securities are traded publicly in the main US markets will soon need to make similar certifications about their companies' filings as well.
Many highly sophisticated investors and practitioners in Europe and the US have confused the requirement to make a certification in response to the order (a one-time US-only obligation) with these similar provisions in the act.
The act requires the principal executive and financial officers of all issuers traded publicly in US markets to certify the filings of their companies on an ongoing basis. The SEC is now promulgating regulations, which the SEC currently intends to put into effect on or before 29 August 2002. Until they have been released, it will remain uncertain whether non-US executives will be required to certify only annual disclosures on Form 20-F or both annual and interim disclosures. The act also imposes criminal liability on senior executives who knowingly certify disclosures that are inaccurate or incomplete.
Observers have also voiced concerned that the certifications required under the order and the act could result in yet another wave of revelations of accounting irregularities, damaging already fragile market confidence worldwide. Others have observed that the requirements may have particularly harsh consequences in specific circumstances. For example, senior executives may be reluctant to certify financials audited by the now defunct Arthur Andersen, and the transition to a new auditing team may not yet be complete. Where senior executives have recently taken up new positions, they may have good reason to hesitate before personally certifying previous disclosures. Finally, companies already in the process of working through issues relating to existing disclosure practices may find their time has run out as the deadline for certification looms.
As the financial press, investors and advisers have tended in recent weeks to focus on the order, many senior executives of non-US companies are astonished to learn that they are now burdened with their own certification requirements under US law. In particular, the potential criminal liability under the act will focus many minds. Senior executives of non-US companies should immediately begin taking steps to prepare for compliance to the act.
They will also wish to monitor closely the approaches taken by many of their US colleagues in making required certifications and otherwise complying with these new provisions of US law.