The Sarbanes-Oxley Act was implemented to improve the transparency with which Public companies in the US conduct their business, by imposing strict levels of corporate governance.
As the UK moves towards similar levels of corporate governance, a Sarbanes-Oxley style regime may be implemented in this country if the Company Law Reform 'White Paper' is any guide. UK businesses will be subjected to penalties tougher than the US Sarbanes-Oxley for breach of accounting offences.
Adrian Giles from Venesis comments:
"The looming implementation of the US Sarbanes-Oxley Act will have a two- fold effect on UK businesses. Firstly, any non-US business listed on the New York Stock Exchange, of which there are estimated to be 470, will have to comply with the full force of the Sarbanes-Oxley legislation. In the US the average cost of compliance is estimated to be approximately $5 million, with the estimated total for US businesses being $5 billion this year alone".
Adrian Giles continues:
"The other effect on UK and European businesses will be the implementation of a similar system in the UK, either as an EU initiative or by Central Government taking a lead from the US. Either way, the need for some system to stamp out corporate misconduct is there. I believe there will be a lot of pressure from the US for European businesses to meet the same standard".
As a result of Sarbanes-Oxley, many UK businesses with a US presence will be forced to consider de-listing from the US stock exchange. Once seen as a way of gaining access to a wide pool of investment, some firms will now question whether the cost of maintaining a US listing now outweighs the benefits.