Over the past several years, the Securities and Exchange Commission has become more active in pursuing the global enforcement of U.S. securities fraud and bribery laws. In 2007, for example, the SEC made 556 requests to foreign authorities for enforcement assistance, responded to 454 requests from abroad, and pursued several enforcement actions involving companies located in and actions taken in such far-flung places as Estonia, Canada, Hong Kong, Guernsey, the United Kingdom, and Kazakhstan. The SEC Speaks in 2008, Office of International Affairs Outline, 1645 PLI/Corp 1181, 1202-03 (February 8–9, 2008).

In response to the SEC’s expanding global reach, some in the international business community have voiced concerns about the costs and inefficiencies of complying with multiple regulatory schemes, with their incompatibilities and their various requirements. The SEC itself has acknowledged that “regulatory overlap from different national securities regulatory regime can result in additional costs for U.S. investors and regulatory compliance burdens on market participants without consideration of whether such costs afford any additional meaningful investor protections.” SEC Announces Next Steps for Implementation of Mutual Recognition Concept, March 24, 2008.

On March 24, 2008, the SEC announced that it planned to take additional steps to facilitate cross-border cooperation—what the SEC called “mutual recognition.” The SEC’s intent is to develop protocols and agreements that would either allow or require the SEC to defer to the regulations of other nations deemed to have high quality regulatory regimes.

The Commission announced no definitive plans. But it stated that it was considering exploring initial agreements with foreign regulatory counterparts based on assessments of the compatibility of their regulatory regimes. The Commission also is considering the adoption of a process and a framework for engaging and coordinating other national regulators and other regulatory schemes.

Although the SEC’s announcement does not commit it to any particular course of action, it appears that the SEC is wasting no time in moving forward with its plans. On March 29, 2008, the SEC announced that it has begun formal discussions with the Australian Securities and Investment Commission and the Australian Treasury Department to develop a mutual recognition arrangement for the two nations’ securities markets. These negotiations will be watched closely for their potential impact on regulatory and enforcement policies.

The SEC’s announcement should be welcome news for foreign companies that increasingly rely on U.S. investors as a source of capital investment. Although the SEC’s plans are in the nascent stages, if the SEC’s intent is fully realized, foreign entities may no longer need to conform with SEC regulations provided they satisfied the regulatory requirements of their home country. That said, it is not yet clear what specific effect a mutual recognition policy will have on the SEC’s enforcement policies or ability. What happens in Australia should give a good sense of what may result.

If you have any questions regarding this matter, please do not hesitate to contact the Heller Ehrman attorney with whom you regularly work or any of the Heller Ehrman lawyers listed below:

David Chu | +852 2292 212

Larry Keeshan | +1 (415) 772-6113

Richard Martin | +1 (212) 847-8769

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