Harvey Pitt, the head of the US Securities and Exchanges Commission, yesterday took the heat out of a simmering transatlantic row by promising to be "receptive and creative" to complaints that European companies will be caught up in new US laws to combat financial wrongdoing.
In a speech which combined conciliatory language with a pledge that the Sarbanes-Oxley Act must not be undermined, Mr Pitt offered reassurance that the law will be interpreted in a way which takes European business concerns into account.
He pledged increased co-operation with European regulators, and suggested that the SEC might open an office in Europe. With US diplomats undecided as to whether this would be located in London or Brussels, there was an immediate flurry of interest from the UK, which sees London as the key centre for European financial regulation.
The EU is concerned about how European companies will be affected by the act, a law designed to crack down on corporate wrongdoing in the wake of the Enron and WorldCom scandals. Among other things, it establishes a federal oversight board for the accounting industry, which would include non-American firms that audit US-listed companies.
Mr Pitt indicated he would consider exempting EU auditors from US supervision if the EU set up its own common regulatory system. Adoption of a "comprehensive" EU approach would have "enormous bearing on whether and the extent to which we would apply" the US regulations, he added.
The European Internal Market Commissioner, Frits Bolkestein, said the EU will consider setting up an oversight committee based on the US model, although officials said that the initiative was in its early stages. "We are studying the US committee and whether there should be a similar board here in Europe with broadly the same rules," said Mr Bolkestein, who also spoke at the conference hosted by the Institute of Chartered Accountants of England and Wales.
Asked about fears that the obligations imposed by the Sarbanes-Oxley Act might conflict with European legislation, Mr Pitt said he was aware of the problem, adding that he had "to find a way to interpret the law in keeping with its spirit" while still considering local laws.
Mr Pitt also marked down some red lines for the US administration. "Our mandate is to implement the Sarbanes-Oxley act fully for all companies, foreign and domestic," he said. "Foreign companies therefore can expect that many of our new rules will apply to them."
The European Commission welcomed the stance. Jonathan Todd, spokesman for Mr Bolkestein, said: "There is a clear understanding on their part that we have genuine and well-founded concerns."