Mercado Libre "MELI" and the non-compliance with SOX

The Sarbanes-Oxley Act, better known simply as SOX, was a bill passed in 2002 to prevent deceptive financial reporting practices and other cases of fraud. Inspired by large corporations like Enron, any company listed on the New York Stock Exchange was forced to comply with these new accounting standards - including foreign companies.

For several years, foreign entities enjoyed several benefits from becoming a public company in the United States. As a Morrison & Foerster report notes, some of these advantages include: Increased visibility and prestige, immediate access to US capital markets (which are still among the largest in the world), the ability to attract and reward talent acquisitions, offering shares in the company's growth and the power to send credible signals to the market that the organization will protect the interests of minority shareholders.

SOX has a wide-ranging jurisdiction and any company with a dual listing on a US exchange that has 500 or more American shareholders must become compatible. Understandably, several foreign companies were frustrated when they found out that SOX would affect them, as well as American organizations. Many were excluded and became private as a result - in 2006, a study by Mazars found that 17% of European companies considered the option.

Section 302, one of the main sections of SOX, requires that executive officers and chief financial officers sign the documentation and certify that the financial statements are accurate based on these controls and are true measures of a company's rating. Previously, companies needed only the word of the responsible auditor.

Section 404 was another important component of the project, which also requires executive management and auditors to report on the adequacy of established controls. This again forced many companies to change the way they managed controls, in an effort to achieve compliance.

Foreign companies need to consider SOX compliance as much as any American company. While meeting these standards costs money, the benefits far outweigh the negative ones and can create real advantages for international organizations looking to develop credibility in the market.

Mercado Libre, listed on the NASDAQ since 2017 as "MELI" today operates in 18 countries, has more than 2.9 million users and is vehemently disregarding SOX standards, both in Brazil and in other countries that operate in Latin America.

In your 2019 report, you have beautiful phrases:

We behave like good corporate citizens, with integrity and transparency. We expect that everyone who is part of the Free Market perform their duties in accordance with the highest ethical and behavioral standards. Likewise, we have the same expectations as our suppliers, partners and customers. We work to ensure that values of honesty, fairness and respect prevail in all of our relationships.

But this is only on paper, the reality very much due to the foreign language barrier (many people do not speak English) prevents greater repercussions. And also the lack of knowledge of laws, both civil and governance, allow MELI to thrive in the midst of ignorance.

The only action today that a person from Brazil for example does is to complain on the website RECLAME AQUI, that even the Free Market is a champion of complaints

But although Reclame AQUI is a respected site in Brazil, it has no legal force, only the negative repercussions on the internet.

I did some research and saw that the number of lawsuits actually filed by consumers is high, but it is very low compared to the amount of problems that people have.

Many "let it go" because they know about the delay in Brazilian justice, or else they just don't have the money to file lawsuits.

But among the research I did, I found that if we can make the problems we face public (websites, blogs, portals and even on TV) we can get a little more attention, since NO service channels for Mercado Libre and Mercado Pago in Brazil work.

I created an online petition, which is here. For people to subscribe, and this list will be filed with the Brazilian Government Agency for Law Enforcement and Prosecution of Crimes of SP and Rio de Janeiro as soon as they reach a significant number of signatures.

In this way and making the disclosure of this in international media I have in view to have the strength to negotiate some type of effective action in the attendance and in this way not to shake the stock market that they so much preserve. If we get attention, we can cause stock prices to plummet, as they fail to comply with SOX rules, and we will have a way to mischaracterize the reports sent to the board of directors and compliance / ethics.

I tried in many ways to talk to Stelleo Tolda, Marcos Galperin, Nicolas` Galperin, Nicolas Alejandro Aguzin, Meyer "Micky" Malka, Emiliano Calemzuk, Pedro Arnt, Osvaldo Gimenez, Daniel Rabinovich, Marcelo Melamud. They are all part of the MELI Governance Board. But I never had that answer.

Soon I will release data on complaints and indices of resolutions to get an idea of the problem, not only in Brazil, but throughout Latin America