UK plc faces an estimated $226m (£122m) bill for implementing stringent rules on internal controls under section 404 of the US Sarbanes-Oxley Act.
The news came as the London Stock Exchange revealed it was anticipating a surge in de-listings by companies fleeing the increasing burden of regulatory compliance on US markets.
One of the heaviest blows came in the form of section 404, which will force UK companies with a dual US listing to document and annually test key controls. The requirements, to be phased in from July next year, will also require management to prepare audited statements that controls are working effectively.
According to research done in the US, the cost of compliance is likely to be around $2m (£1.08m), but UK companies have so far been reluctant to talk figures.
BP became the latest UK business to beef up in anticipation of the rules last week, by recruiting a 20-strong team in preparation for compliance at the end of next year. Others actively preparing for the changes include Shell, Toyota and HSBC.
Accountancy Age has learned that the increase in US regulation has dampened UK companies’ appetite for dual listing. In August, Lastminute.com quit NASDAQ. Tracey Pierce, head of company services at the LSE, said compliance burdens were driving an ‘increasing trend’ for delisting from US markets, and added that ‘in certain circumstances we will be competing for that business’.
A survey of 321 US companies by Financial Executives International found the biggest corporations could face a bill as large as $4.6m for compliance, while the average burden would be $2m. Assuming the same average for the 113 UK companies listed on the NYSE and NASDAQ, that would add up to a £122m bill that business may be reluctant to foot.
David Watts, partner at KPMG, said there was ‘unhappiness’ with the level of the costs. ‘I think it’s fair to expect that UK companies will be experiencing costs in the order of millions rather than hundreds of thousands of pounds.’
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