managements' liability of foreign subsidiaries? 2605

  • hi everyone,
    I’m analyzing the requirements for a foreign (german) subsidiary of an us-listed company (headquarter in usa).
    we are in scope of sox.
    i know that ceo und cfo of the headquarter have to certificate financial reports, internal controls,…
    what do you think about the liability of foreign subsidiaries?
    I guess the liability for foreign subsidiaries just existents in the internal relastionship between headquarter and subsidiary…

  • I depends. There is different kinds of liability. There is criminal liability (i.e. enforced by the U.S. Department of Justice), administrative liability (i.e. enforced by the U.S. Securities and Exchange Commission (SEC)) and civil liabilties (i.e. lawsuits by investors that purchased the securities of the company while relying on incorrect information provided by the company. If we are talking about criminal liability according to section 906 of the Sarbanes-Oxley Act then only the CEO and the CEO of the issuer of the securities (normally that is the parent company) have criminal liability. However, willful violations of the Securities Act, the Securities Exchange Act or the Sarbanes-Oxley Act by any person are also criminally punishable.
    Even in the case of a foreign subisidiary, there can be administrative liability for the employees of the foreign subsidiar (e.g. refer to the case of a Swiss group with a secondary listing on the New York Stock Exchange where accounting employees of the U.S. subsidiary were subject to sanctions by the SEC
    In reality, because groups of companies supply consolidated financial and non-financial information for the whole group, it will be a question of internal organization and internal policies and procedures

Log in to reply