NEW YORK (CNN/Money) -
By August 14, the CEOs and CFOs of 947 of America's most prominent companies will swear that their financial results are accurate and investors will no longer have a reason to worry about fraud. Well, that's the pipe dream at least.
While many are expecting the Securities and Exchange Commission's edict to be a big step forward in restoring confidence in the American financial markets, many others question whether it will do any good at all (Adam Lashinsky made that case in Wednesday's Bottomline column -- click here).
The impact of Aug. 14 will be limited for one key reason: There are a substantial number of important companies that do not even have to certify their results.
Only companies with revenues of at least $1.2 billion in their latest fiscal year have to certify their results by August 14th. Companies that are incorporated outside of the U.S., even if they are essentially U.S. based companies with foreign headquarters for tax purposes, do not have to certify either.
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Only 926 to go...
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| CEOs and CFOs at these 21 companies have signed off on their books -- 947 have to by Aug. 14.
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In fact, 56 of the companies in the S&P 500 are exempted. Tyco, which has been among the most intensely scrutinized companies since the Enron collapse due to its complicated accounting, does not have to sign off on its books because it is incorporated in Bermuda (perversely, Enron is on the SEC list). See the full SEC list here.
Other prominent companies that most investors would think of as American firms don't have to do so either. Schlumberger, an oil services giant with a market value of nearly $25 billion and trailing 12-month sales of $13.8 billion, has its headquarters in New York. But since it is incorporated in the Netherlands Antilles, it is exempt from certifying. Ditto for Carnival, the world's largest operator of cruise lines. Its executive offices are in Miami but the company is incorporated in Panama.
Yahoo and eBay, two of the most recognizable Internet companies, are not required to sign off on their books because neither had more than $1.2 billion in revenue in their latest fiscal year. Other well-known companies in the S&P 500 that don't have to certify because they fell short of the revenue requirement are Biogen, Palm and Tupperware.
To be sure, none of those companies have come under scrutiny for corporate wrongdoing. But the $1.2 billion revenue requirement has eliminated some smaller companies in the spotlight from having to certify their results.
ImClone, whose former CEO was arrested for insider trading, doesn't have to certify its results since it tallied just $33 million in sales last year. And even though the SEC is probing Martha Stewart's sale of ImClone shares in December, she doesn't have to swear that the books for her own company, Martha Stewart Living Omnimedia, are accurate because sales totaled only $296 million last year.
That could change in the near future, though. There is currently a proposed rule that would require all U.S. incorporated companies, regardless of size, to certify their results. The rule does not call for companies incorporated outside of the U.S. to sign off on their books, however.
The SEC is accepting public comments about the proposed rule until August 19. John Heine, a spokesman for the SEC says that after that, staff members will look at the comments and based on them, develop a recommendation for further action. For a look at the proposed rule, including information on how to submit comments, click here.
As of August 1, only 21 companies had submitted sworn certification statements to the secretary of the SEC, according to the SEC's web site. But even if the remaining 926 all do so by August 14, investors would be wise to remember that there are still thousands more companies that don't have to do so.
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