By Nick Edser BBC News Online business staff

A new US law aimed at cracking down on corporate fraud is set to have an impact on some of the UK's biggest firms.

The Sarbanes-Oxley act - which was signed into law by President George W Bush last month - introduced harsh penalties for anyone found guilty of corporate wrong-doing.

In the blaze of publicity surrounding the passing of the bill, one part that got little attention was that the measures would also apply to overseas firms with secondary listings on the New York Stock Exchange (NYSE).

The UK government has said it has "concerns" about some parts of the act and is talking to US authorities to see if UK companies can be exempted from some measures.

Major UK firms such as Vodafone, BP and GlaxoSmithKline are among the companies that could be affected.

Tougher penalties

The Sarbanes-Oxley Act was rushed though Senate as politicians sought to reassure investors shaken by corporate scandals such as Enron and WorldCom.

Corporate scandals like Enron have rocked confidence in US firms

The law requires chief executives and chief financial officers to pledge that their company's accounts are "truly presented".

If any accounting irregularities are subsequently found, executives face huge fines and jail terms of up to 20 years.

The act applies to all companies listed in New York, which includes many of the UK's biggest firms who have American Depository Receipts (ADRs) listed there.

ADRs effectively allow US investors to buy and trade shares in UK companies on the NYSE.

The new measures have reportedly worried some companies, who say they will increase costs and could deter some people from top positions.

Seeking exemption

The UK government is currently in talks with US authorities to try to modify the requirements for UK firms.

An American investor will want the same kind of disclosure from an overseas firm as they get from a domestic one

Rod Armitage, CBI

"British companies active in the US are obliged to comply with US laws which apply to them," the Department of Trade & Industry (DTI) said.

But it added: "The Government - like a number other governments and the European Commission - has concerns about the extra-territorial effects of the Sarbanes-Oxley Act."

The DTI said it had raised these concerns with the US before the bill was signed, and it was "continuing to pursue these matters at national and European level".

It said it was also "continuing to press for UK companies with US listings to be exempted from other certification requirements in the Act on the grounds that they are already subject to strong regulation here".

More details needed

The Confederation of British Industry (CBI) said many firms were still trying to find out what was involved.

BP says it is "reasonably relaxed" about the new measures

The head of company affairs at the CBI, Rod Armitage, told BBC News Online that while the CBI had been "unhappy about the speed and lack of consultation" with the act, most companies wanted to comply with the measures.

That was because if they sought an exemption to the rules, they were concerned it might reflect badly on them.

"An American investor will want the same kind of disclosure from an overseas firm as they get from a domestic one," Mr Armitage said.

The main area of confusion is over the reporting of quarterly results.

UK firms do not have to have quarterly figures audited - only annual results need to be - but this may change under the Sarbanes-Oxley act.

At present UK companies are waiting for more details to be released by the US Securities and Exchange Commission (SEC).

The SEC is due to issue guidance within the next couple of weeks.

Mr Armitage said there was concern that any company about to issue quarterly results, may have to suddenly audit the numbers.

He added that the CBI was hoping the SEC would take a "sensible attitude" to the timescale of introduction.

Delay

The oil giant BP is one of the UK firms that stands to be affected by the new act.

A company spokesman told BBC News Online that it was "reasonably relaxed" about the process, and was waiting for the SEC guidance.

But the spokesman said the act had already delayed the filing of its interim results.

The company reported its half-year results on 30 July, but has delayed filing the accounts - with the SEC's blessing - until it finds out if it needs to take extra measures.