Top securities lawyers believe mainland firms soon will find American stock exchanges more accessible Mainland companies should find it easier to list on American stock exchanges in the near future as lawmakers lean towards reducing regulatory requirements, according to prominent United States securities lawyers. 'I don't think we'll see a lot of new regulations in the short term. Instead, my sense is we're going to take a step back and likely modify those existing requirements,' said Paul, Weiss partner Daniel Kramer, who was visiting Beijing from New York yesterday. 'It's a balance. On the one hand, you want to make sure there's integrity in the markets, but on the other, you want to make sure the regulation is not so onerous it inhibits companies from listing on American exchanges.' Large mainland firms that might otherwise have listed in the US have been discouraged in the past year by the high costs involved in meeting new US regulatory requirements introduced in the wake of high-profile corporate scandals. 'Compliance costs are adding anywhere between US$1 million and US$3 million to a company's listing bill,' Hogan & Hartson's China chief representative Steve Robinson said. 'That doesn't make sense for a company with, say, a US$30 million market cap.' The threat of class-action litigation from shareholders is also a major deterrent to foreign companies considering a US listing. Although regulatory requirements should be loosened in the coming months, Mr Kramer said legal cases against already-listed mainland firms were likely to rise. He said class-action suits and Securities and Exchange Commission investigations against non-US companies were increasing as were settlement amounts. An SEC probe is under way into the December 2003 initial public offering of China Life Insurance. Increased litigation and a tougher regulatory environment are the result of the 2002 Sarbanes-Oxley Act, named after Senator Paul Sarbanes and Representative Michael Oxley, which was introduced in the wake of scandals such as Enron and WorldCom. The act established stringent new accounting and regulatory rules aimed at protecting investors by improving corporate governance and disclosure. But Senator Sarbanes was quoted in US media last week as saying the act could be amended if parts of it were deemed ineffective. Prior to a visit to China this week, New York Stock Exchange chief executive John Thain said the commission was working to ease the regulatory burdens imposed by US compliance rules. Of the 450 non-American firms listed on the exchange, 16 are from China and eight from Hong Kong. Last week, SEC chairman Christopher Cox, on a visit to Beijing, encouraged mainland firms to list on US exchanges, which he said represent the 'gold standard'. But more controversially, he attributed China Construction Bank's decision not to list in the US to the bank's inability to meet tougher US standards. While in China, Mr Cox reached an 'information sharing' agreement with his counterpart, China Securities Regulatory Commission chairman Shang Fulin, which is expected to be formalised early next year.
