Former Federal Reserve Chairman Alan Greenspan said he expects newly energised congressional Democrats to ease some accounting requirements of a landmark 2002 anti-fraud law that much of corporate America has criticised as overly burdensome.
Figure 1: Alan Greenspan: Former Federal Reserve Chairman
Sen. Charles Schumer represents New York and its huge financial services industry, and Rep. Barney Frank of Massachusetts is expected to become chairman of the House Financial Services Committee. Both back changes to a key part of the Sarbanes-Oxley law, said Greenspan, who retired in January after serving as Federal Reserve chairman since 1987 under Republican and Democratic administrations.
"It's likely something is going to happen," probably in the next Congress' two-year term, Greenspan said in an hourlong question-and-answer session at a conference organised by the technology firm AMR Research.
Greenspan said he expects changes to a Sarbanes-Oxley provision called Section 404, which requires publicly traded companies to file reports with regulators on the strengths of their internal financial controls and fix any problems. Critics say the rules have triggered a steep rise in accounting expenses and need to be relaxed, especially for smaller companies.
The regulations US companies face are a key reason why several firms have recently chosen to make their public stock debuts on overseas markets such as London, rather than in the United States, Greenspan said.
Greenspan said Congress failed to adequately consider potential drawbacks of some of Sarbanes-Oxley's requirements before the legislation overwhelmingly passed both houses in 2002 in response to financial scandals at companies such as Enron and WorldCom.
"Sarbanes-Oxley passed both houses with almost unanimous votes. Any bill that goes through Congress with that sort of vote cannot be good," Greenspan said to laughter and loud applause. The law passed "with the vast, vast majority of the House and Senate not having read the bill," Greenspan said.
Dick Cheney Expresses Concerns About Sarbanes-Oxley
The US Vice President Dick Cheney had recently revealed that the White House would be willing to lighten the Sarbanes-Oxley legislation, after admitting that the measure could be considered to have gone 'too far'. The decision came a month after Hank Paulson, the Treasury Secretary, began to meet bank executives to discuss regulatory concerns, and appeared to confirm a broader shift in American policy towards a watering down of the Sarbanes-Oxley rules.
Cheney has reportedly said that,"I think you can make a case that Sarbanes-Oxley went too far. The fact of the matter is, the things—when we had, for example, Enron and WorldCom, the problems that developed from the standpoint of those companies, those activities were illegal before there was any additional regulation put in place."
The Sarbanes-Oxley Act was introduced in 2002 in the wake of the Enron and WorldCom accounting scandals, but it will become more vulnerable from November because the Act’s co-authors—the Democrat Senator Paul Sarbanes and the Republican Michael Oxley—are stepping down.
Separately, Christopher Cox, chairman of the US Securities and Exchange Commission, said yesterday that Section 404 of Sarbanes-Oxley, which requires companies to disclose more about their internal financial controls, and their outside auditors to issue opinions on the controls, has been costlier than expected.
"The law, in some respects, has been too expensive for investors", Cox told reporters at a conference on corporate accounting of share options. The SEC chief said he expected to receive before the end of the year a recommendation on how to fine-tune Section 404.
The October issue of the SDA Asia Magazine has an article on Sarbanes Oxley and SOA. It delineates the security and compliance challenges in Open Architecture. Given the current trends in international commerce, compliance and computing, the information technology professional’s version of the ancient Chinese curse would surely have to be, 'May you live in integrated times'. Advances in application integration, of which Service-Oriented Architecture (SOA) is perhaps the most revolutionary, promise a host of business advantages from an IT perspective. Yet, they also introduce several new security and compliance risks that must be dealt with if businesses are to benefit from the new technology. Using a supply chain management example, this article examines the mix of potential benefits and security and compliance risks that SOA introduces to a business. |
