From: Merlin Underwood [mu@institutionaldesign.com]
Sent: Monday, August 19, 2002 11:13 AM
To: rule-comments@sec.gov
Subject: Institutional Design comments Re File No. S7-21-02

August 19th, 2002

Jonathan G. Katz,
Secretary,
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington
DC 20549-0609

Re: Comments on Release No: 34-46300; File No: S7-21-02 - Proposed Rule:
Certification of Disclosure in Companies' Quarterly and Annual Reports


Dear Mr. Katz,


To your request for comments on the proposed rule change, I respond on
behalf of Institutional Design, a London-based Corporate Governance
Consultancy. We represent the interests of a number of major corporate
firms across Europe who have a secondary listing in the United States.
As a result, we have followed with interest the passing into law of the
Sarbanes-Oxley Act of 2002 (hereinafter the "Act"). 


GENERAL COMMENTS


Institutional Design welcomes the passing of the Act. We recognise that
it is clearly in the interests of companies around the world to see
investor confidence in the world's leading equity market restored.
However, given the speed with which the legislation was passed, there is
some concern as to both the precise application of the Act and its
extraterritorial reach.

It has long been recognised amongst Congress, the SEC and the Exchanges
that it may be inappropriate to impose US corporate governance standards
on non-US companies due to disadvantages of a "one-size-fits-all"
approach to regulation. This seems to have been largely overlooked in
the congressional debate, perhaps in part due to the pressing nature of
the Act and the desire to prevent US companies from reincorporating or
otherwise changing their domicile in order to avoid the regulations
(section 302 specifically provides for this).

There seem to be three groups of rules in the Act. Firstly, those that
are obligatory immediately and do not require the SEC to adopt
implementing rules. Secondly, those that require the SEC to adopt
implementing rules but give the SEC little or no discretion as to the
application of those rules. Thirdly, those that establish a principle
but give the SEC a considerable amount of discretion as to how to meet
that principle. 

Given the historic reluctance of the regulatory authorities to impose
comparable standards on non-US companies (for the reasons outlined
above) we would urge you to use a common-sense approach to the adoption
of implementing rules wherever possible. This is consistent with
precedent and can be presumed to be consistent with the will of
Congress.


SPECIFIC COMMENTS


Section 302 of the Act requires the SEC to adopt rules implementing
specified statutory certification requirements for principal executive
officers by August 29, 2002. It is clear from both the Act and the SEC
Proposed Rule that these certification requirements are to extend to
Foreign Private Issuers. However, we seek to clarify the exact nature of
their application.

As we understand it, the certification requirements must apply to each
company's "annual" or  "quarterly" report that is "filed" or "submitted"
under section 13(a) or 15(d) of the Securities Exchange Act of 1934. It
is clear that the certification requirements will apply to Foreign
Private Issuers filing annual reports on Form 20-F, being an "annual"
report that is "filed" with the SEC pursuant to the relevant sections of
the Exchange Act. 

However, it is less than clear whether the required certifications will
(or should) extend to quarterly financial information that is provided
on Form 6-K. The Proposed Rule makes no reference to information
contained under the cover of Form 6-K and we hope that this is due the
SEC realising that the compliance costs of such a requirement on Foreign
Private Issuers would be excessive given the speculative nature of the
benefits.

We wish to draw your attention to two ways in which the information
provided in Form 6-K can be distinguished from other forms for which
certification will be required. We believe that these differences result
in the certification requirements being unsuitable for this type of
disclosure.

Firstly, Form 6-K is neither a "periodic" nor a "quarterly" report. The
form is used to promptly furnish information when it is made public
pursuant to the Foreign Private Issuer's home country law, filed with
stock exchanges or distributed to shareholders [we note that the SEC is
currently soliciting comments as to whether to extend the Form 6-K
disclosures to certain specified information]. 

Secondly, a technical distinction can be drawn as to why the information
provided on this form should not be subject to the Section 302
certification requirements. Unlike the information provided on Form 20-F
the contents of Form 6-K are not formally "filed" or "submitted" to the
SEC but are rather "furnished" to or "deposited" with the SEC. We
believe that were it the intention of Congress for the contents of Form
6-K to be certified, different terminology would have been employed in
section 302.


CONCLUSION


For the reasons outlined above we would seek to clarify the position
regarding information provided by a foreign issuer on Form 6-K. We feel
that the information provided to the SEC under this cover is both
practically and legally distinct from that which is required to be
certified under section 302. 


If we can provide any further clarification on the points made in this
letter, please contact either the undersigned or Merlin Underwood
(mu@institutionaldesign.com) at +44 2073366606.


Respectfully Submitted,

Jonathan Bates
(jjb@institutionaldesign.com)

Managing Director
Institutional Design