Talks over US whistleblowing fears

The Law Society has begun talks with the American Bar Association over the effects of the Sarbanes-Oxley Act on solicitors.

The Act - drawn up in the wake of the Enron and Worldcom scandals - puts pressure on in-house and external counsel, among others, to blow the whistle on their companies if anything is happening that they think is a material departure from the regulatory regime.

The Act as it now stands would affect UK-based legal advisers to US companies, and those of UK companies listed in the US when it comes into force next year.

The full effects of the Act will only be known in January, when the Securities and Exchange Commission reports to the US Congress explaining exactly how far the whistleblowing obligations will stretch.

Steve Durno, secretary to the Law Society's company law committee, said: 'We do not need to panic just yet, and we are liaising with the American Bar Association in relation to their efforts to secure exemptions for lawyers from the Act.'

The current thinking is that the US is pressurising the EU to relax new rules on large financial groups in exchange for the US exempting European companies and lawyers from the effect of the Act.

Harvey Pitt, chairman of the US Securities and Exchange, met with EU internal markets commissioner Frits Bolkestein last week to discuss the effect of the Sarbanes-Oxley Act on EU entities.

Following that meeting, Mr Pitt reportedly told a meeting of accountants - who would also be affected by Sarbanes-Oxley - that at a time when the US was carefully evaluating the impact of its rules and regulations on foreign entities, the EU should do the same in respect of US companies.

However, he said there was no direct link between concessions sought by the EU on Sarbanes-Oxley and EU financial conglomerates regulations, which the US fears will put layers of costly regulation on US companies with EU banking and insurance interests.

Jeremy Fleming