Risk & Compliance

Fear and Loathing of the SEC

The Securities and Exchange Commission is sniffing out footholds in Europe and Asia.
Alan RappeportNovember 8, 2007

The Securities and Exchange Commission has its sights on possible footholds outside the United States. “London or Brussels have been mentioned as potential overseas offices,” John Nester, an SEC spokesman, told CFO.com. “But we would want to look at Asia as well.”

Such plans are still very preliminary, Nester noted. Overseas offices would function more as a base for attending meetings and forums abroad, not as outposts for policy-making, market oversight or enforcement, he said.

Indeed, with the increased movement toward the convergence of U.S. and global accounting standards, thoughts of a growing SEC presence outside the United States seem to be abounding. At a roundtable last summer, for example, a number of former SEC chairmen agreed that it was time to begin thinking about creating offices overseas.

To be sure, signs of SEC expansion are likely to rattle nerves abroad. Asked last week during an interview with CFO.com if Europe feared that the SEC might try to take over as the world’s regulator, Sir David Tweedie, chairman of the International Accounting Standards Board, answered briefly but clearly. “Yes,” he said.

Two new surveys explain what appears to be a distinct wariness of the SEC on the part European companies. DLA Piper, an international law firm, finds that 52 percent of respondents from 250 European companies polled about the potential of global regulation said an SEC investigation would be “damaging” or “very damaging” to them. The report noted that this sentiment stems from the pressures European firms feel from U.S. laws and the “frequency and aggression” of U.S. prosecutions. Apparently, European firms are more fearful of the SEC than they are of their own regulators.

Even the United Kingdom may have reason to worry. Despite the notion of America’s “special relationship” with the U.K., companies there seem to be garnering no regulatory favor. A report by Fulbright and Jaworski, another international law firm, queried 40 British firms and found a sharp rise in inquiries from the SEC in 2007. This year the percentage of companies targeted by the SEC spiked to 81 percent; last year less than 25 percent received inquiries.