Hong Kong Joins International Outcry Against US Corporate Fraud Bill

by Mary Swire, Tax-News.com, Hong Kong

13 August 2002

The Sarbanes-Oxley bill passed two weeks ago by the US Congress has excited a mixture of fear and loathing among foreign companies and their governments, which worry about 'economic imperialism', as well as the threat of US legal action against their nationals who happen to fall foul of the Fed's draconian new rules against corporate fraud.

Hong Kong is no exception. The government is alarmed at the threat to its sovereignty, and Permanent Secretary for Financial Services Tony Miller told the South China Morning Post that the government had raised its concerns with the US authorities, but had so far received no response.

The bill creates a new, semi-autonomous 'oversight' body as part of the Securities and Exchange Commission (SEC) which has wide powers to investigate the behaviour of any US public company anywhere is the world. Many such companies are of course foreign, so that for instance a Russian company with a parallel US listing and a subsidiary in, say, Australia, would fall under the new authority's remit, and the executives of such a company would be liable to the sanctions the authority can impose, including inditements for offences under the bill which carry long prison terms.

Bank of China executives, blameless as they may be, must be blessing themselves that they didn't do a parallel IPO in New York two weeks ago, as they had originally intended!

Mr Miller said: "It is, of course, important for the US regulator to do the investigation, but any such activities should be done only on the condition of respecting the sovereign rights of other countries."

Mr Miller said Hong Kong would like to work with other authorities such as those in Australia and the EU, which were concerned, and join forces to fight the US government's challenge to their sovereign rights.

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