SOX Center

Attempts to overturn portions of Sarbanes-Oxley may pick up steam this week after an April 4 report showed the value of European stock markets has overtaken U.S. markets for the first time since World War I.

The seismic shift in the value of equity markets is a further blow to the New York Stock Exchange and other U.S. markets, which have seen some of the larger initial public offerings opt for overseas markets instead of their traditional NYSE home.

Critics of SarbOx blame the recent regulation for pushing the IPOs abroad. They claim the legislation makes compliance in the U.S. too costly.

New chief accountant named for SEC’s division of investment management

Richard F. Sennett has been named chief accountant of the Securities and Exchange Commission’s division of investment management.

He will have primary responsibility for oversight of the financial reporting and accounting practices of registered investment companies.

According to the SEC, he was instrumental in the development and implementation of the division’s Sarbanes-Oxley annual report review process.

AccountancyAge: Sarbox man gets chief accountant role at SEC

Paul Sarbanes and Michael Oxley, renowned authors of the 2002 Sarbanes-Oxley corporate governance reform legislation, have become America’s favorite whipping boys for the emigration of foreign equity listings from New York to London. But it was the earlier efforts of another congressman, one who now has far more influence over the competitiveness of the US capital markets, which in fact sparked the exodus by deliberately mixing domestic market regulation with foreign policy.

In 1999, two commissions reported to Congress on Chinese military links to commercial and financial activities in the US. The reports grabbed headlines with their focus on the purported role of the US capital markets in financing Chinese weapons development and proliferation. The first of these commissions was chaired by congressman Christopher Cox, now chairman of the Securities and Exchange Commission.

Financial Times: Cox, not Sarbox, is to blame for equity exodus

Double-listed the company’s assets to induce a bank to continue financing its operations.

Steven Garfinkel, former chief financial officer of defunct health-care finance company DVI, was sentenced to 30 months in prison and ordered to pay $51 million in restitution, reported the Philadelphia Business Journal.

Last December, Garfinkel pleaded guilty to mail fraud and to violating the provision of Sarbanes-Oxley that requires CEOs and CFOs to certify financial reports filed with the Securities and Exchange Commission.

DVI provided financing to health-care providers seeking to purchase or lease diagnostic medical equipment; in turn, DVI secured financing from Fleet Bank (since acquired by Bank of America). According to U.S. Attorney Patrick L. Meehan, in a statement last November announcing the charges, Garfinkel defrauded Fleet by double-listing approximately $50 million in assets to induce the bank to lend money to DVI. The finance chief then falsely certified a quarterly report, Meehan also alleged.

CFO.com: CFO to Pay $51M for Fraud, Sarbox Breach

Will companies and their auditors ever agree on how to test information technology systems for Sarbanes-Oxley compliance? The Institute of Internal Auditors hopes its new guidelines on IT controls will help.

Since companies began complying with the Sarbanes-Oxley Act, one common complaint about auditor scrutiny has been loud and clear: external auditors have spent too much time on technology systems that seem unrelated to financial statements.

It’s an issue that has been confusing for both sides. The problem: Information technology has an often indirect relationship with the final results in financial statements, and there’s little standard guidance to tell companies how to determine the strength and security of IT-specific internal controls.

CFO.com: A Truce in the Sarbox Tech War?

A group of America’s largest firms has joined forces to found the Center for Audit Quality (CAQ) in a bid to restore corporate confidence in the profession.

The move comes as auditors and companies prepare to adjust to significant changes to the implementation of the Sarbanes-Oxley compliance and audit law, which have been unveiled by the Securities and Exchange Commission and the Public Company Accounting Oversight Board in recent weeks.

Accounting professionals will dominate the new organisation’s 12-member board. Seven seats will be held by the head of the American Institute of Certified Public Accountants and the chief executives of the six largest audit firms, with two seats rotating among smaller and mid-tier firms. Three public board members will be named shortly, the Dow Jones reported.

AccountancyAge: Audit lobby group formed to combat Sarbox beef-up

China’s top banking regulator said Thursday that U.S. market regulations, including the increasingly-criticized Sarbanes-Oxley act, are the “right and correct response to the market.”

Tightened U.S. securities regulations in the wake of high-profile corporate collapses such as Enron should not be reversed, to stem the tide of global companies looking elsewhere to list their shares, said Liu Mingkang, chairman of the China Banking Regulatory Commission.

“To my American friends, I say ‘Don’t worry,’” Liu said at a lunch in Davos, where the World Economic Forum’s Annual Meeting is taking place.

The “quality of markets is of key importance - sooner or later,” Mingkang said.

China’s own market regulations are on course to catch up with the rest of the world’s best practices, he said.

Morningstar: DAVOS: China Banking Regulator: Sarbox Is Not A Problem

The much maligned new rules are a big hit with investors

There has been no shortage of public outcry over Sarbanes-Oxley, the controversial 2002 accounting reform legislation that requires top corporate executives to fill out reams of new forms and personally certify their financial reports. SarbOx, say its critics, adds millions in compliance costs, makes life miserable for corporate directors, and encourages companies to bolt to foreign stock exchanges. The complaints have been so passionate that regulators are now planning to loosen the rules, probably before the year is out.

Not so fast, says a growing chorus of investors. Lost amid all the boos over SarbOx, they say, are some major benefits. The biggest: SarbOx and related reforms have produced much more reliable corporate financial statements, which investors rely on when deciding whether to buy or sell shares. For them, SarbOx has been a godsend.

What’s more, says Duncan W. Richardson, chief equity investment officer at Eaton Vance Management and overseer of $80 billion in stockholdings, even the act’s much disparaged requirements for testing internal financial controls could drive gains in corporate productivity and profits. Says Donald J. Peters, a portfolio manager at T. Rowe Price Group: “The accounting reforms have been a win.”

BWonline:Not Everyone Hates SarbOx

ALL BUSINESS: Rolling Back Sarbanes-Oxley Corporate Reform Law Will Hurt Investors

Critics trying to build support for a rollback of corporate reform laws argue that they’re way too costly and have taken all the fun out of doing business in America. Those are lame excuses.

The latest rant comes from Shutterfly Inc. chairman Jim Clark. He said he is leaving the online photo company because the Sarbanes-Oxley law has taken reform “too far” and was crimping his ability to lead the way he wanted.

Next time he reads about another company swept up in the stock-options backdating scandal or hears of increased fraud in foreign financial markets, then maybe he’ll wake up to the benefits of reform.

Sarbanes-Oxley — or Sarbox, as it’s come to be known — was passed in 2002 after scandals that led to the collapse of Enron, WorldCom and others. It has forced companies to rethink how they handle everything from their disclosure of information to shareholders to the independence of their boards.

It’s despised in many corners of corporate America. Those who complain often focus on the time and expense needed to put policies and procedures in place. Of particular hatred is Section 404, which is designed to ensure companies’ books are in order by forcing them to take on the laborious task of reviewing their internal controls.

Yahoo!: ALL BUSINESS: Sarbanes-Oxley Is a Must

Online photo site Shutterfly Inc. said on Monday that Chairman Jim Clark, co-founder of Web pioneer Netscape Communications, had resigned, saying securities regulations had “gone too far.”

In a letter to management released in a regulatory filing, the Silicon Valley veteran said he was resigning from the board both because the company has matured from a technology developer into a manufacturer and due to constraints imposed on major shareholders by the Sarbanes-Oxley securities law.

Shutterfly made an initial public offering of shares in September, and Clark held roughly 30 percent of the outstanding shares following the IPO, according to the shareholder prospectus. Shutterfly shares are trading down 4 percent from its initial offering price of $15.

“Sarbox (Sarbanes-Oxley) dictates that I not chair any committee due to the size of my holdings, not be on the compensation committee because of the loan I once made to the company, not be on the governance committee,” Clark wrote.

Reuters:UPDATE 1-Shutterfly chairman quits, attacks Sarbanes-Oxley