SOX Center

As U.S. regulators and industry recognize Sarbanes-Oxley’s fifth year this July 30, most investors (57 percent) in a new survey by Pepperdine University’s Graziadio School of Business and Management believe the requirements imposed by the law, holding CEOs and senior management personally accountable for the accuracy of their companies’ financial disclosures, are about right, while one-third (31 percent) say its restrictions did not go far enough. Only eight percent say the law went too far.

The study on investor attitudes toward CEOs and their corporate boards finds almost nine out of ten investors say that jail time should be mandatory for corporate officers and board members convicted of practices harmful to employees, shareholders and the public. Four out of five investors surveyed favor actions by prosecutors to aggressively recover company losses from convicted executives and/or board members’ personal assets.

Yahoo!Finance: Study: Investors Say Sarbanes-Oxley Got It Right; Wish Mandatory Jail Time for Wrongdoers

 Grilling the assembled members of the Securities and Exchange Commission about Sarbanes-Oxley, Barney Frank just took the time to note “I feel compelled by the spirit of bipartisanship to come to the defense of the Republican president and the Republican Congress that passed [Sarbanes-Oxley].”

CFO.com: SEC: No Help Needed from Congress

Says Sarbanes-Oxley creates fear of litigation

A study of 4,000 U.S. companies shows the Sarbanes-Oxley corporate reform law has had a chilling effect on risk-taking as many companies seek to conserve cash instead of developing new products or services, a University of Pittsburgh researcher said yesterday.

U.S. companies significantly cut research and development spending and capital expenditures, while at the same time increasing cash holdings compared with their U.K. counterparts in the period after the 2002 law, the study found.

“I think there is a cause and effect relationship and it runs through the newly empowered independent majorities on the boards of directors of public companies,” said Peter Wallison, a senior fellow at the American Enterprise Institute, a think-tank with close ties to the administration of George W. Bush.

Some members of an AEI discussion panel suggested Sarbanes-Oxley, or SOX, had the effect of introducing independent but risk-adverse directors, as well as creating a fear of litigation.

The Star.com: Reform law chills U.S. risk-taking, study finds

Almost three-quarters of the chief financial officers in the US believe that Sarbanes-Oxley should be “repealed or reformed” as the costs of the 2002 compliance law have outweighed the benefits, according to a survey.

The findings underscore the scale of frustration over the costs associated with implementing “Sarbox”, even as regulators said that costs were expected to fall as new guidelines for the law were finalised.

In a survey of 484 chief financial officers by Duke University and CFO Magazine, almost 70 per cent said the costs of adhering to Sarbox requirements - principally its section 404 provisions on checking internal controls - “greatly outweigh its benefits”.

A total of 35 per cent said repeal or reform of the law was “badly needed”, although no distinction was made in the survey questions between repeal or reform.

Most business groups and US law makers believe the law does not need to be repealed, although a majority believe that reform of the way it is implemented is needed.

Such reform is already being carried out. The Securities and Exchange Commission has just provided executives with new guidance on Sarbox implementation.

The Australian: CFOs call for Sarbanes repeal

With the SEC holding to its Dec. 15 deadline for compliance, companies will be scrambling.

Time’s up!

That’s the message for small public companies from the Securities and Exchange Commission, which met recently to give final approval to new guidelines and amendments to the Sarbanes-Oxley corporate reform law.

The five-member commission didn’t include a hoped-for extension of the Dec. 15 deadline for small public companies to comply with provisions that critics say are too costly and time-consuming. That means small public companies will have to follow the complex Sarbanes-Oxley rules, which require an annual evaluation of the effectiveness of internal controls, for fiscal years that end after that date.

“We feel at this point it’s full throttle ahead to get us fully compliant by the end of the year,” said Wayne Lipschitz, chief financial officer and vice president of finance for Brentwood-based Grill Concepts Inc., which owns and manages the Daily Grill and Grill on the Alley restaurants.

Small public companies are defined as those whose market value — the price of their stock multiplied by the number of their shares outstanding — is less than $75 million. Grill Concepts has a market value of about $45 million.

latimes.com: Sarbanes-Oxley: No more delays

Challenging optimism about the efficiency of new auditing standards, the House Small Business Committee’s chairwoman called on federal regulators to give thousands of small public companies even more time to comply with a controversial section of the 2002 Sarbanes-Oxley law.

Rep. Nydia Velazquez, D-NY, said on Tuesday that the Securities and Exchange Commission and the Public Company Accounting Oversight Board must implement the internal-controls section of the law in a way that “does not hamper America’s competitiveness.” She said that “postponing the compliance deadlines for at least an additional year would allow us to make this determination.”

The 2002 law requires company management to evaluate internal controls over financial reporting, subject to review by outside auditors. The SEC has delayed applying the rules to more than 6,000 small companies at least four times, most recently citing a need to make the rules more efficient. Under current policy, small public companies will begin submitting management reports in 2008, and the auditor reports in 2009.

Nasdaq: House Lawmaker Calls On SEC To Delay Internal-Controls Rules

Business advisors Grant Thornton LLP have applauded the SEC and the PCAOB for their efforts in addressing the legitimate concerns of the capital markets while still reinforcing the value of Sarbanes-Oxley to investors.

“We believe that the new guidance and auditing standards strike an appropriate balance between efficiency and effectiveness, though it will take time to fully realize the effects,” the company said in a statement.

It added: “We believe that the current efforts of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) will help organizations more efficiently monitor the effectiveness of their internal control systems throughout the year. COSO recently commissioned Grant Thornton LLP to develop guidance - scheduled for completion in early 2008 - that will include in-depth guidance for implementing the monitoring component of COSO’s Internal Control — Integrated Framework.”

A public discussion document regarding this guidance should be available in June 2007.

Investorsoffshore: Advisors Applaud SEC, PCAOB For Addressing Sarbanes-Oxley Concerns

Research and Markets has announced the addition of “A Focus on Law Analysis: The Intricacies and Effects of Sarbanes-Oxley Legislation” to their offering.

This 25-page research report written for all executives examines in-depth, the intricacies and effects of Sarbanes-Oxley legislation. From pre-Sarbanes obstruction of justice statutes to new Sarbanes-Oxley provisions; from a point-by-point look at several pinnacle cases to what specific provisions mean to corporations, this report covers the ins and outs of Sarbanes-Oxley, touching on the important and highlighting the essential.

Yahoo!Finance: Research and Markets: Learn of the Effects of Sarbanes-Oxley Legislation

The timing of the scandal helped build support for tougher rules in the 2002 bill on securities laws.

His name is not on the law, but maybe it should be. Perhaps more than either Sen. Paul S. Sarbanes or Rep. Michael G. Oxley, Bernard J. Ebbers is responsible for the far-reaching change in U.S. securities laws since the Depression.

That law has changed the face of international securities markets and greatly increased the regulation of auditors around the world.

Ebbers, 63, was sentenced Wednesday to 25 years in prison for his role in the fraud that led to the bankruptcy filing of WorldCom. Ebbers founded LDDS Communications, a small long-distance company, and through acquisitions built it into a giant.

But WorldCom collapsed in fraud in early 2002, just as Congress seemed unable to agree on securities legislation that had been spurred by the Enron fraud a few months earlier. The WorldCom collapse ensured passage of a bill that was far tougher than had seemed possible only weeks before.

OC Register: WorldCom’s collapse gave boost to Sarbanes-Oxley

The U.S. Securities and Exchange Commission approved new guidance on Wednesday to help companies comply with what critics say is a burdensome and costly provision of the Sarbanes-Oxley corporate reform law.

The agency, by a 5-0 vote, encouraged companies to take a more risk-based approach to complying with Section 404 of the legislation.

“Congress never intended that the 404 process should become inflexible, burdensome and wasteful,” SEC Chairman Christopher Cox said at the agency’s open meeting.

Section 404 requires companies to assess their internal controls over financial reporting. It also calls for external auditors to report on management’s assessment and on the controls themselves.

Corporations and business lobbyists have complained that Section 404 was too expensive and the SEC has conceded that, in some cases, overly cautious companies caused the law’s costs to exceed its benefits.

Yahoo!Finance: SEC adopts new guidance for Sarbanes-Oxley