July 27, 2005
Cox: No Rollback of SEC Reforms
Christopher Cox, the nominee for SEC Chairman, pledges to continue on the great work by Chairman Donaldson. This is good news. The worst thing for US financial markets would be the roll back of Sarbanes-Oxley. This would signal to the world that corruption WILL be tolerated and that all companies have to do is yell loud enough and their prayers will be answered.
With mounting evidence every day of new material weaknesses, there is no room for roll back. Let's continue what legislators stared in 1977 with the Foreign Corrupt Practices Act - strong internal controls. This USA is a leader. Let's continue to act like it. No one else is up to the role.
An excerpt on this topic:
"Cox pledges to follow SEC reform
By Stephen Labaton The New York Times
WASHINGTON Representative Christopher Cox, the president's choice to be the next leader of the Securities and Exchange Commission, has pledged that he would not undo regulations recently adopted by the agency but would, in his words, "build upon them."
In his first public remarks about securities regulation since he was chosen for the post last month, Cox, an experienced lawmaker from Orange County, California, tried to demonstrate that, contrary to the assertions of his critics, he was not in the pocket of special interests. At his confirmation hearing Tuesday, he suggested that he would not reopen the debate over the expensing of stock options given to executives. He promised to fight for adequate resources at the agency, and he affirmed the "substantial and vital role" of state laws and state prosecutors in policing markets.
His first priority, he said, was enforcing laws and prosecuting frauds.
And Cox repeatedly pledged not to undermine the significant rules approved by his predecessor, William Donaldson, who was criticized by some executives, sectors of Wall Street and administration officials who said he went too far.
"He has been a stand-up guy in very tough times," Cox said of Donaldson. "I look at his record as one of great achievement."
Even before the hearing began, lawmakers said the full Senate was all but certain to approve Cox's nomination and those of two Democratic nominees on Thursday or Friday, before leaving for an August recess.
On Tuesday, Cox brought his skills as a politician to the hearing. His embrace of Donaldson was a marked departure from the approach taken by Cox's two predecessors. At his hearing two years ago, Donaldson tried to sharply distinguish himself from Harvey Pitt, who was forced to resign after a series of political missteps. Pitt made it plain in his early days that he would be significantly different from Arthur Levitt.
But if Cox does following Donaldson, then he is certain to disappoint the two other Republican members of the commission and some administration officials who have sharply criticized numerous recent initiatives.
Donaldson broke ranks with his fellow Republican commissioners and aligned himself with the Democrats on issues that included the imposition of large corporate fines for securities violations, the registration of hedge funds and new governance rules for mutual funds.
WASHINGTON Representative Christopher Cox, the president's choice to be the next leader of the Securities and Exchange Commission, has pledged that he would not undo regulations recently adopted by the agency but would, in his words, "build upon them."
In his first public remarks about securities regulation since he was chosen for the post last month, Cox, an experienced lawmaker from Orange County, California, tried to demonstrate that, contrary to the assertions of his critics, he was not in the pocket of special interests. At his confirmation hearing Tuesday, he suggested that he would not reopen the debate over the expensing of stock options given to executives. He promised to fight for adequate resources at the agency, and he affirmed the "substantial and vital role" of state laws and state prosecutors in policing markets.
His first priority, he said, was enforcing laws and prosecuting frauds.
And Cox repeatedly pledged not to undermine the significant rules approved by his predecessor, William Donaldson, who was criticized by some executives, sectors of Wall Street and administration officials who said he went too far.
"He has been a stand-up guy in very tough times," Cox said of Donaldson. "I look at his record as one of great achievement."
Even before the hearing began, lawmakers said the full Senate was all but certain to approve Cox's nomination and those of two Democratic nominees on Thursday or Friday, before leaving for an August recess.
On Tuesday, Cox brought his skills as a politician to the hearing. His embrace of Donaldson was a marked departure from the approach taken by Cox's two predecessors. At his hearing two years ago, Donaldson tried to sharply distinguish himself from Harvey Pitt, who was forced to resign after a series of political missteps. Pitt made it plain in his early days that he would be significantly different from Arthur Levitt.
But if Cox does following Donaldson, then he is certain to disappoint the two other Republican members of the commission and some administration officials who have sharply criticized numerous recent initiatives.
Donaldson broke ranks with his fellow Republican commissioners and aligned himself with the Democrats on issues that included the imposition of large corporate fines for securities violations, the registration of hedge funds and new governance rules for mutual funds.
WASHINGTON Representative Christopher Cox, the president's choice to be the next leader of the Securities and Exchange Commission, has pledged that he would not undo regulations recently adopted by the agency but would, in his words, "build upon them."
In his first public remarks about securities regulation since he was chosen for the post last month, Cox, an experienced lawmaker from Orange County, California, tried to demonstrate that, contrary to the assertions of his critics, he was not in the pocket of special interests. At his confirmation hearing Tuesday, he suggested that he would not reopen the debate over the expensing of stock options given to executives. He promised to fight for adequate resources at the agency, and he affirmed the "substantial and vital role" of state laws and state prosecutors in policing markets.
His first priority, he said, was enforcing laws and prosecuting frauds.
And Cox repeatedly pledged not to undermine the significant rules approved by his predecessor, William Donaldson, who was criticized by some executives, sectors of Wall Street and administration officials who said he went too far.
"He has been a stand-up guy in very tough times," Cox said of Donaldson. "I look at his record as one of great achievement." For the complete article, click here.
To see how your company can achieve Sarbanes-Oxley Compliance with the lowest cost and the highest quality, see www.issuescentral.com to learn more about the Compliance Playbook(tm).
With mounting evidence every day of new material weaknesses, there is no room for roll back. Let's continue what legislators stared in 1977 with the Foreign Corrupt Practices Act - strong internal controls. This USA is a leader. Let's continue to act like it. No one else is up to the role.
An excerpt on this topic:
"Cox pledges to follow SEC reform
By Stephen Labaton The New York Times
WASHINGTON Representative Christopher Cox, the president's choice to be the next leader of the Securities and Exchange Commission, has pledged that he would not undo regulations recently adopted by the agency but would, in his words, "build upon them."
In his first public remarks about securities regulation since he was chosen for the post last month, Cox, an experienced lawmaker from Orange County, California, tried to demonstrate that, contrary to the assertions of his critics, he was not in the pocket of special interests. At his confirmation hearing Tuesday, he suggested that he would not reopen the debate over the expensing of stock options given to executives. He promised to fight for adequate resources at the agency, and he affirmed the "substantial and vital role" of state laws and state prosecutors in policing markets.
His first priority, he said, was enforcing laws and prosecuting frauds.
And Cox repeatedly pledged not to undermine the significant rules approved by his predecessor, William Donaldson, who was criticized by some executives, sectors of Wall Street and administration officials who said he went too far.
"He has been a stand-up guy in very tough times," Cox said of Donaldson. "I look at his record as one of great achievement."
Even before the hearing began, lawmakers said the full Senate was all but certain to approve Cox's nomination and those of two Democratic nominees on Thursday or Friday, before leaving for an August recess.
On Tuesday, Cox brought his skills as a politician to the hearing. His embrace of Donaldson was a marked departure from the approach taken by Cox's two predecessors. At his hearing two years ago, Donaldson tried to sharply distinguish himself from Harvey Pitt, who was forced to resign after a series of political missteps. Pitt made it plain in his early days that he would be significantly different from Arthur Levitt.
But if Cox does following Donaldson, then he is certain to disappoint the two other Republican members of the commission and some administration officials who have sharply criticized numerous recent initiatives.
Donaldson broke ranks with his fellow Republican commissioners and aligned himself with the Democrats on issues that included the imposition of large corporate fines for securities violations, the registration of hedge funds and new governance rules for mutual funds.
WASHINGTON Representative Christopher Cox, the president's choice to be the next leader of the Securities and Exchange Commission, has pledged that he would not undo regulations recently adopted by the agency but would, in his words, "build upon them."
In his first public remarks about securities regulation since he was chosen for the post last month, Cox, an experienced lawmaker from Orange County, California, tried to demonstrate that, contrary to the assertions of his critics, he was not in the pocket of special interests. At his confirmation hearing Tuesday, he suggested that he would not reopen the debate over the expensing of stock options given to executives. He promised to fight for adequate resources at the agency, and he affirmed the "substantial and vital role" of state laws and state prosecutors in policing markets.
His first priority, he said, was enforcing laws and prosecuting frauds.
And Cox repeatedly pledged not to undermine the significant rules approved by his predecessor, William Donaldson, who was criticized by some executives, sectors of Wall Street and administration officials who said he went too far.
"He has been a stand-up guy in very tough times," Cox said of Donaldson. "I look at his record as one of great achievement."
Even before the hearing began, lawmakers said the full Senate was all but certain to approve Cox's nomination and those of two Democratic nominees on Thursday or Friday, before leaving for an August recess.
On Tuesday, Cox brought his skills as a politician to the hearing. His embrace of Donaldson was a marked departure from the approach taken by Cox's two predecessors. At his hearing two years ago, Donaldson tried to sharply distinguish himself from Harvey Pitt, who was forced to resign after a series of political missteps. Pitt made it plain in his early days that he would be significantly different from Arthur Levitt.
But if Cox does following Donaldson, then he is certain to disappoint the two other Republican members of the commission and some administration officials who have sharply criticized numerous recent initiatives.
Donaldson broke ranks with his fellow Republican commissioners and aligned himself with the Democrats on issues that included the imposition of large corporate fines for securities violations, the registration of hedge funds and new governance rules for mutual funds.
WASHINGTON Representative Christopher Cox, the president's choice to be the next leader of the Securities and Exchange Commission, has pledged that he would not undo regulations recently adopted by the agency but would, in his words, "build upon them."
In his first public remarks about securities regulation since he was chosen for the post last month, Cox, an experienced lawmaker from Orange County, California, tried to demonstrate that, contrary to the assertions of his critics, he was not in the pocket of special interests. At his confirmation hearing Tuesday, he suggested that he would not reopen the debate over the expensing of stock options given to executives. He promised to fight for adequate resources at the agency, and he affirmed the "substantial and vital role" of state laws and state prosecutors in policing markets.
His first priority, he said, was enforcing laws and prosecuting frauds.
And Cox repeatedly pledged not to undermine the significant rules approved by his predecessor, William Donaldson, who was criticized by some executives, sectors of Wall Street and administration officials who said he went too far.
"He has been a stand-up guy in very tough times," Cox said of Donaldson. "I look at his record as one of great achievement." For the complete article, click here.
To see how your company can achieve Sarbanes-Oxley Compliance with the lowest cost and the highest quality, see www.issuescentral.com to learn more about the Compliance Playbook(tm).
July 26, 2005
PCAOB Releases Ethics & Independence Rules
New standards for ethics, auditor independence and tax services from the PCAOB. The only thing that is needed is approval from the SEC and you can print that. These folks are working hard to clarify rules. I have met many of the personnel from the PCAOB and they are extremely dedicated to their cause.
Issued today:
"Board Adopts Standard on Remediation of Material Weaknesses, Rules on Auditor Independence and Tax Services
Washington, DC, July 26, 2005 -- The Public Company Accounting Oversight Board today adopted certain ethics and independence rules addressing tax services, contingent fees, and certain related general ethics and independence standards.
The Board also adopted an auditing standard on reporting on whether a previously reported material weakness continues to exist. This standard, PCAOB Auditing Standard No. 4, establishes requirements and provides direction that applies when an auditor is engaged to report on whether a previously reported material weakness in internal control over financial reporting continues to exist as of a date specified by management.
The ethics and independence rules adopted today fall into three areas. First, the rules identify three circumstances in which the provision of tax services impairs an auditor's independence –
Rule 3521 treats registered public accounting firms as not independent of their audit clients if they enter into contingent fee arrangements with those clients.
Rule 3522(a) treats a registered public accounting firm as not independent from an audit client if the firm provides services related to marketing, planning, or opining in favor of the tax treatment of a transaction that is a confidential transaction as defined in Rule 3501. In addition, Rule 3522(b) would treat a registered public accounting firm as not independent if the firm provides services related to marketing, planning, or opining in favor of a tax treatment on a transaction that is based on an aggressive interpretation of applicable tax laws and regulations. Rule 3522(b)'s scope would also include listed transactions as defined by U.S. Treasury Department regulations.
Rule 3523 will treat a registered public accounting firm as not independent if the firm provides tax services to certain members of management who serve in financial reporting oversight roles at an audit client or to immediate family members of such persons.
Second, the rules further implement the Act's pre-approval requirement by strengthening the auditor's responsibilities in connection with seeking audit committee pre-approval of tax services. Specifically, Rule 3524 would require a registered public accounting firm that seeks such pre-approval to describe proposed tax services engagements, in writing, for the audit committee; to discuss with the audit committee the potential effects of the services on the firm's independence; and to document the substance of that discussion. Third, the rules lay a foundation for the Board's independence rules. Specifically, Rule 3502 codifies, in an ethics rule, the principle that persons associated with a registered public accounting firm should not cause the firm to violate relevant laws, rules, and professional standards due to an act or omission that the person knew, or was reckless in not knowing, would directly and substantially contribute to such violation. Rule 3520 includes a general obligation requiring a registered public accounting firm and its associated persons to be independent of the firm’s audit clients throughout the audit and professional engagement period.The rules and standard will not take effect unless approved by the Securities and Exchange Commission pursuant to Section 107(b) of the Sarbanes-Oxley Act. Background information is available on the Board's Web site at www.pcaobus.org under Rulemaking."
To learn how your firm can more cost effectively comply with Sarbanes-Oxley, see www.issuescentral.com to learn more about the Sarbanes-Oxley Compliance Playbook(tm).
Issued today:
"Board Adopts Standard on Remediation of Material Weaknesses, Rules on Auditor Independence and Tax Services
Washington, DC, July 26, 2005 -- The Public Company Accounting Oversight Board today adopted certain ethics and independence rules addressing tax services, contingent fees, and certain related general ethics and independence standards.
The Board also adopted an auditing standard on reporting on whether a previously reported material weakness continues to exist. This standard, PCAOB Auditing Standard No. 4, establishes requirements and provides direction that applies when an auditor is engaged to report on whether a previously reported material weakness in internal control over financial reporting continues to exist as of a date specified by management.
The ethics and independence rules adopted today fall into three areas. First, the rules identify three circumstances in which the provision of tax services impairs an auditor's independence –
Rule 3521 treats registered public accounting firms as not independent of their audit clients if they enter into contingent fee arrangements with those clients.
Rule 3522(a) treats a registered public accounting firm as not independent from an audit client if the firm provides services related to marketing, planning, or opining in favor of the tax treatment of a transaction that is a confidential transaction as defined in Rule 3501. In addition, Rule 3522(b) would treat a registered public accounting firm as not independent if the firm provides services related to marketing, planning, or opining in favor of a tax treatment on a transaction that is based on an aggressive interpretation of applicable tax laws and regulations. Rule 3522(b)'s scope would also include listed transactions as defined by U.S. Treasury Department regulations.
Rule 3523 will treat a registered public accounting firm as not independent if the firm provides tax services to certain members of management who serve in financial reporting oversight roles at an audit client or to immediate family members of such persons.
Second, the rules further implement the Act's pre-approval requirement by strengthening the auditor's responsibilities in connection with seeking audit committee pre-approval of tax services. Specifically, Rule 3524 would require a registered public accounting firm that seeks such pre-approval to describe proposed tax services engagements, in writing, for the audit committee; to discuss with the audit committee the potential effects of the services on the firm's independence; and to document the substance of that discussion. Third, the rules lay a foundation for the Board's independence rules. Specifically, Rule 3502 codifies, in an ethics rule, the principle that persons associated with a registered public accounting firm should not cause the firm to violate relevant laws, rules, and professional standards due to an act or omission that the person knew, or was reckless in not knowing, would directly and substantially contribute to such violation. Rule 3520 includes a general obligation requiring a registered public accounting firm and its associated persons to be independent of the firm’s audit clients throughout the audit and professional engagement period.The rules and standard will not take effect unless approved by the Securities and Exchange Commission pursuant to Section 107(b) of the Sarbanes-Oxley Act. Background information is available on the Board's Web site at www.pcaobus.org under Rulemaking."
To learn how your firm can more cost effectively comply with Sarbanes-Oxley, see www.issuescentral.com to learn more about the Sarbanes-Oxley Compliance Playbook(tm).
Pension Funds and Sarbanes-Oxley - Neglected or Not?
As a risk based approaches are further refined in Sarbanes-Oxley compliance efforts, experts are finding that a huge risk area: Pension Funds, are being largely ignored. Interesting since this is such a huge item for most public companies. Sounds like more attention to real risks and not as much to largely well controlled IT processes is in order.
An article on this topic is here:
"A Neglected Area of Sarbanes-Oxley Compliance
Managing Compliance Standards, July 21, 2005
With Wayne H. Miller, CEO of Denali Fiduciary Management, a firm that consults with industry on retirement plan governance. Miler co-authored the Fiduciary Assistance and Compliance Systems (FACS©) Program, an ERISA (Employee Retirement Income Security Act of 1974) trust governance guidebook and the on-line ERISA fiduciary governance training available through Financial Executives International (FEI).
Question: Has Sarbanes-Oxley increased the responsibility of corporate executives and board members with respect to the management of pension funds?
Miller: Internal controls in pension funds were always supposed to be there. What Sarbanes-Oxley has done is to make the penalties draconian for attesting to internal controls when they're not there. Under ERISA [the Employee Retirement Income Security Act of 1974], there is a statutory requirement that executives attest that the plan is being operated in accordance with all applicable laws. I'm not entirely sure why, but I am finding that when consultants come in, they don't do a whole lot with retirement fund internal controls. I've spoken to corporate treasurers who have told me they passed their Sarbanes-Oxley audits with flying colors, but the consultants didn't even look at the retirement plans. I've also seen a fairly in depth report on a Fortune 1000 company that described what the Sarbanes-Oxley consultant did, and it turns out they didn't do much as far as the retirement plan is concerned.
There has also always been a statutory duty under ERISA for board members to watch over the people managing pension funds. Up until a year ago, I've never seen a board do this well. Boards historically haven't drilled down into the details of fund management, although one could argue that is not their responsibility. With $6 trillion under the private pension umbrella, and with increasing problems cropping up in the private pension system in this country, it behooves board members to drill down to make sure companies are getting it done right." For the complete article, click here.
To see how your company can effectively and rapidly accomplish your Sarbanes-Oxley compliance efforts, see www.issuescentral.com to learn more about the Compliance Playbook(tm) or call toll free today 800.410.6681 ext 112.
An article on this topic is here:
"A Neglected Area of Sarbanes-Oxley Compliance
Managing Compliance Standards, July 21, 2005
With Wayne H. Miller, CEO of Denali Fiduciary Management, a firm that consults with industry on retirement plan governance. Miler co-authored the Fiduciary Assistance and Compliance Systems (FACS©) Program, an ERISA (Employee Retirement Income Security Act of 1974) trust governance guidebook and the on-line ERISA fiduciary governance training available through Financial Executives International (FEI).
Question: Has Sarbanes-Oxley increased the responsibility of corporate executives and board members with respect to the management of pension funds?
Miller: Internal controls in pension funds were always supposed to be there. What Sarbanes-Oxley has done is to make the penalties draconian for attesting to internal controls when they're not there. Under ERISA [the Employee Retirement Income Security Act of 1974], there is a statutory requirement that executives attest that the plan is being operated in accordance with all applicable laws. I'm not entirely sure why, but I am finding that when consultants come in, they don't do a whole lot with retirement fund internal controls. I've spoken to corporate treasurers who have told me they passed their Sarbanes-Oxley audits with flying colors, but the consultants didn't even look at the retirement plans. I've also seen a fairly in depth report on a Fortune 1000 company that described what the Sarbanes-Oxley consultant did, and it turns out they didn't do much as far as the retirement plan is concerned.
There has also always been a statutory duty under ERISA for board members to watch over the people managing pension funds. Up until a year ago, I've never seen a board do this well. Boards historically haven't drilled down into the details of fund management, although one could argue that is not their responsibility. With $6 trillion under the private pension umbrella, and with increasing problems cropping up in the private pension system in this country, it behooves board members to drill down to make sure companies are getting it done right." For the complete article, click here.
To see how your company can effectively and rapidly accomplish your Sarbanes-Oxley compliance efforts, see www.issuescentral.com to learn more about the Compliance Playbook(tm) or call toll free today 800.410.6681 ext 112.
July 25, 2005
Cox Nomination Should be a Done Deal Soon
Hopefully Cox will continue the important work that Chairman Donaldson started with the SEC. With the number of material weaknesses increasing all the time in public companies, there is no need to think that the Sarbanes-Oxley legislation needs to be weakened.
May 16th guidance from the SEC and PCAOB gave registrants and CPA firms more information on how to better implement the legislation. The first such legislation was passed by Congress in 1977/1978 in the form of the Foreign Corrupt Practices Act. But later in the 1980's companies began to move away from reviewing internal controls in their audits. So accountability waned and corruption increased.
Sarbanes-Oxley is the right legislation. Investor confidence is priceless. Chairman Cox, do not roll back this legislation. It is too important.
Excerpt from Financial Times
"Bush acts to smooth way for Cox to chair SEC
By Andrew Parker in New York Jul 24 2005 22:55
Christopher Cox, the Republican congressman chosen by President George W. Bush to be next chairman of the Securities and Exchange Commission, (pictured) could face a smooth confirmation of his appointment by the Senate this week, after the White House took steps to temper potential Democratic opposition.
On Friday Mr Bush sought to prevent Mr Cox's proposed appointment getting delayed, or even blocked, by nominating the Senate Democratic leadership's preferred candidates for the party's two seats on the chief US financial regulator.
The Senate banking committee will question Mr Cox and the two Democratic nominees tomorrow, and as long as there are no significant problems with their responses they could all be confirmed as SEC commissioners before the legislators break for the summer recess at the end of the week.
Richard Shelby, Republican chairman of the Senate banking committee, will “rigorously examine” the three nominees' qualifications, said his spokeswoman. “He hopes to move all three nominees expeditiously in order to have a full slate [of five commissioners] at the SEC,” she added.
The spokesman for Paul Sarbanes, the senior Democrat on the banking committee, welcomed the fact that the legislators would consider all three nominees.
“We look forward to hearing all the nominees' views on how to strengthen investor protections and improve the effectiveness of our securities markets,” he said.
The Senate Democratic leadership has pushed hard to ensure that Annette Nazareth and Roel Campos, the party's preferred candidates for its two SEC seats, are installed with Mr Cox.
Some Democrats fear the SEC could lose sight of its investor protection mission under Mr Cox, given his business-friendly record in Congress and the laissez-faire views of Paul Atkins and Cynthia Glassman, the two existing Republican commissioners. The Democrats attach great importance to having two commissioners to counter-balance the Republicans' views." For the complete article, click here.
To learn more about how to lower cost and rapidly comply with Sarbanes-Oxley, see www.issuescentral.com and do a walk through of the Compliance Playbook(tm)
May 16th guidance from the SEC and PCAOB gave registrants and CPA firms more information on how to better implement the legislation. The first such legislation was passed by Congress in 1977/1978 in the form of the Foreign Corrupt Practices Act. But later in the 1980's companies began to move away from reviewing internal controls in their audits. So accountability waned and corruption increased.
Sarbanes-Oxley is the right legislation. Investor confidence is priceless. Chairman Cox, do not roll back this legislation. It is too important.
Excerpt from Financial Times
"Bush acts to smooth way for Cox to chair SEC
By Andrew Parker in New York Jul 24 2005 22:55
Christopher Cox, the Republican congressman chosen by President George W. Bush to be next chairman of the Securities and Exchange Commission, (pictured) could face a smooth confirmation of his appointment by the Senate this week, after the White House took steps to temper potential Democratic opposition.
On Friday Mr Bush sought to prevent Mr Cox's proposed appointment getting delayed, or even blocked, by nominating the Senate Democratic leadership's preferred candidates for the party's two seats on the chief US financial regulator.
The Senate banking committee will question Mr Cox and the two Democratic nominees tomorrow, and as long as there are no significant problems with their responses they could all be confirmed as SEC commissioners before the legislators break for the summer recess at the end of the week.
Richard Shelby, Republican chairman of the Senate banking committee, will “rigorously examine” the three nominees' qualifications, said his spokeswoman. “He hopes to move all three nominees expeditiously in order to have a full slate [of five commissioners] at the SEC,” she added.
The spokesman for Paul Sarbanes, the senior Democrat on the banking committee, welcomed the fact that the legislators would consider all three nominees.
“We look forward to hearing all the nominees' views on how to strengthen investor protections and improve the effectiveness of our securities markets,” he said.
The Senate Democratic leadership has pushed hard to ensure that Annette Nazareth and Roel Campos, the party's preferred candidates for its two SEC seats, are installed with Mr Cox.
Some Democrats fear the SEC could lose sight of its investor protection mission under Mr Cox, given his business-friendly record in Congress and the laissez-faire views of Paul Atkins and Cynthia Glassman, the two existing Republican commissioners. The Democrats attach great importance to having two commissioners to counter-balance the Republicans' views." For the complete article, click here.
To learn more about how to lower cost and rapidly comply with Sarbanes-Oxley, see www.issuescentral.com and do a walk through of the Compliance Playbook(tm)
July 19, 2005
Material Weaknesses Skyrocket
For those smaller cap companies who hope that SOX 404 will be weakened for them, look at these stats. Material weaknesses are being reported in record numbers by companies of all sizes. This does not make the case for weakening the legislation.
By the time Cox takes office, there will be so much data to support that companies of all sizes have material weaknesses but especially those of smaller market caps.
Excerpt from CFO.com article on Material Weaknesses under Section 404
"Looking at the data by market capitalization, the report found that almost 11 percent of publicly traded companies with a market cap over $75 million reported internal control deficiencies between January 1, 2004, and May 2, 2005. Those companies reported a total of 672 disclosures during that period — 61 percent of the 1,104 disclosures overall. Companies with a market cap under $75 million — the "non-accelerated filers" that are not required to comply with Section 404 until their first fiscal year ending after July 15, 2006 — reported 39 percent of the material weaknesses disclosed during that period."
To crush the cost and improve quality of your compliance efforts, see www.issuescentral.com for more information on the Sarbanes-Oxley Compliance Playbook(tm).
By the time Cox takes office, there will be so much data to support that companies of all sizes have material weaknesses but especially those of smaller market caps.
Excerpt from CFO.com article on Material Weaknesses under Section 404
"Looking at the data by market capitalization, the report found that almost 11 percent of publicly traded companies with a market cap over $75 million reported internal control deficiencies between January 1, 2004, and May 2, 2005. Those companies reported a total of 672 disclosures during that period — 61 percent of the 1,104 disclosures overall. Companies with a market cap under $75 million — the "non-accelerated filers" that are not required to comply with Section 404 until their first fiscal year ending after July 15, 2006 — reported 39 percent of the material weaknesses disclosed during that period."
To crush the cost and improve quality of your compliance efforts, see www.issuescentral.com for more information on the Sarbanes-Oxley Compliance Playbook(tm).
PWC Reports Slowdown in Foreign IPO's on US Markets
Could be a sign of the times, foreign IPO's are down. But if they do not want to be transparent, do we want to risk fraud from foreign companies? Many foreign companies such as Siemens of Germany have complied with these regulations and have thrived. Our markets are still the most robust in the world and Wall Street is having a banner year. The sky is not falling.
An excerpt from a PriceWaterhouseCoopers IPO Report dated:July 19, 2005
"Activity by non-U.S. companies off 50 percent. Only four second-quarter IPOs involved non-U.S. companies this year, compared with eight last year, while the offering value of these transactions fell from $2.3 billion to $492 million. The decline in the number of non-U.S. company IPOs may possibly signal a reluctance to enter the Sarbanes-Oxley reporting environment." For the complete article, click here.
If your company is public or thinking about going public, see www.issuescentral.com to learn more about the Sarbanes-Oxley Compliance Playbook(tm) to help increase efficiency and cut cost of your Section 404 project.
An excerpt from a PriceWaterhouseCoopers IPO Report dated:July 19, 2005
"Activity by non-U.S. companies off 50 percent. Only four second-quarter IPOs involved non-U.S. companies this year, compared with eight last year, while the offering value of these transactions fell from $2.3 billion to $492 million. The decline in the number of non-U.S. company IPOs may possibly signal a reluctance to enter the Sarbanes-Oxley reporting environment." For the complete article, click here.
If your company is public or thinking about going public, see www.issuescentral.com to learn more about the Sarbanes-Oxley Compliance Playbook(tm) to help increase efficiency and cut cost of your Section 404 project.
July 13, 2005
Transition from Rules Based Governance to Principles Based is Important
In the rules based world of US law, we have become accustomed to asking for rules and then hiring massive numbers of experts to help find the loopholes. But in this new world of principles based governance, it is a new landscape. This is partly due to Sarbanes-Oxley but also the harmonization of accounting rules between US GAAP and European accounting standards.
We are now moving to a world where the spirit of the law is more important than dissecting and parsing every word to support the position we want to take. The new world order is both simpler and more challenging. Simpler because there are fewer rules when it comes to ethics but more challenging because executives and boards must now exercise judgement around ethics and not just hide behind loopholes.
This is a good change. Everyone complains about the oppressive number of regulations in the US but in the same breath, these same people ask for more rules to clarify what they are supposed to do. You cannot have it both ways. We need to move to more principle based governance with a measured number of rules.
The reason Sarbanes-Oxley has caused so much heart ache is that a rules based society is trying to comply with a principles based set of legislation. The change will happen. It is already happening.
An excerpt from a Forbes article on this topic, is here:
"No longer is it sufficient to design and implement programs that allow executives to report that the company is complying with all applicable laws and regulations. What is now required is an "organizational culture that encourages ethical conduct and a commitment to compliance with the law." Moreover, the "governing authority" (i.e., board) of an organization must oversee this requirement and is responsible for how ethically the company acts.
Some may believe that overseeing an ethical corporate culture is like measuring fog. Precise metrics to measure cultural health have not yet been standardized, but there is plenty of evidence from previously "unquantifiable" aspects of business that it can be done and that substantial benefits accrue to companies that get it right.
Quality has moved from a subjective measure, manifested in discarding defective merchandise at the end of the assembly line, to a rigorous process that begins in the design phase. Likewise, safety is now something that is not the responsibility of managers or inspectors but of every employee. Step on a construction site without a hard hat, and the nearest worker will insist that you put one on, no matter who you are. Companies that learned how to embrace quality and safety have benefited from better products and lower insurance rates, not to mention knowing that they make products they can be proud of, while also ensuring the health and well-being of their workforce and customers.
Creating a culture of ethics offers similar benefits, and leading companies are already building business processes around it. They are training their workers in the principles that animate the corporate code of conduct, and employees no longer enter a dangerous ethical gray area without a guide. They are measuring the feedback they are getting through anonymous help lines to determine where their risks are. They are infusing discussions of ethics into business communications to correlate the principles they espouse with the business that they practice. Finally, they are driving home the message that ethics is additive to the business, not a cost.
Recent studies have shown that good ethical reputations are linked to an ability to attract and retain customers, suppliers and employees and that companies that effectively manage governance can expect percent-point gains in their market valuations. Ultimately, however, insisting on the fostering and strengthening of ethical corporate cultures is how board members can bring real value to the shareholders they represent and protect and strengthen their company's reputation.Dov Seidman, chairman and chief executive of LRN..." for the complete article, click here.
To learn more how your company can comply with Sarbanes-Oxley, both the rules and the principles, see www.issuescentral.com and find out more about the Compliance Playbook(tm) - the cost effective way to comply with the spirit and the rules of SOX.
We are now moving to a world where the spirit of the law is more important than dissecting and parsing every word to support the position we want to take. The new world order is both simpler and more challenging. Simpler because there are fewer rules when it comes to ethics but more challenging because executives and boards must now exercise judgement around ethics and not just hide behind loopholes.
This is a good change. Everyone complains about the oppressive number of regulations in the US but in the same breath, these same people ask for more rules to clarify what they are supposed to do. You cannot have it both ways. We need to move to more principle based governance with a measured number of rules.
The reason Sarbanes-Oxley has caused so much heart ache is that a rules based society is trying to comply with a principles based set of legislation. The change will happen. It is already happening.
An excerpt from a Forbes article on this topic, is here:
"No longer is it sufficient to design and implement programs that allow executives to report that the company is complying with all applicable laws and regulations. What is now required is an "organizational culture that encourages ethical conduct and a commitment to compliance with the law." Moreover, the "governing authority" (i.e., board) of an organization must oversee this requirement and is responsible for how ethically the company acts.
Some may believe that overseeing an ethical corporate culture is like measuring fog. Precise metrics to measure cultural health have not yet been standardized, but there is plenty of evidence from previously "unquantifiable" aspects of business that it can be done and that substantial benefits accrue to companies that get it right.
Quality has moved from a subjective measure, manifested in discarding defective merchandise at the end of the assembly line, to a rigorous process that begins in the design phase. Likewise, safety is now something that is not the responsibility of managers or inspectors but of every employee. Step on a construction site without a hard hat, and the nearest worker will insist that you put one on, no matter who you are. Companies that learned how to embrace quality and safety have benefited from better products and lower insurance rates, not to mention knowing that they make products they can be proud of, while also ensuring the health and well-being of their workforce and customers.
Creating a culture of ethics offers similar benefits, and leading companies are already building business processes around it. They are training their workers in the principles that animate the corporate code of conduct, and employees no longer enter a dangerous ethical gray area without a guide. They are measuring the feedback they are getting through anonymous help lines to determine where their risks are. They are infusing discussions of ethics into business communications to correlate the principles they espouse with the business that they practice. Finally, they are driving home the message that ethics is additive to the business, not a cost.
Recent studies have shown that good ethical reputations are linked to an ability to attract and retain customers, suppliers and employees and that companies that effectively manage governance can expect percent-point gains in their market valuations. Ultimately, however, insisting on the fostering and strengthening of ethical corporate cultures is how board members can bring real value to the shareholders they represent and protect and strengthen their company's reputation.Dov Seidman, chairman and chief executive of LRN..." for the complete article, click here.
To learn more how your company can comply with Sarbanes-Oxley, both the rules and the principles, see www.issuescentral.com and find out more about the Compliance Playbook(tm) - the cost effective way to comply with the spirit and the rules of SOX.
July 12, 2005
Thanks to PWC for Corroborating Yesterday's Blog Entry
Wow, we wrote about fraud in T&E yesterday but we were surprised to see this today. I guess fraud in T&E can come from the auditors or the registrants. Not a great example when the firm that is checking the books is cooking the books.
"PWC settles false claims charges with $41.9 mln
Tue Jul 12, 2005 7:32 AM BST
WASHINGTON (Reuters) - Accounting firm PricewaterhouseCoopers has agreed to pay $41.9 million to settle charges that it made false claims to the U.S. government for travel reimbursement, the Justice Department said on Monday.
The settlement stemmed from charges that PWC failed to consistently disclose travel rebates it received for airline, hotel, rental car and other travel services and did not reduce the claims made to the government by the amounts of the rebates, the department said in a statement.
The accusations were first made in a whistle-blower lawsuit against the firm in 2001.
PWC spokeswoman David Nestor said the firm was "pleased to have resolved this matter with the federal government."
"The firm's former policy that gave rise to this matter was changed in 2001 before we were aware of any government investigation," Nestor said.
PWC "knowingly presented claims for payment to the United States for amounts greater than the travel expenses actually incurred and in violation of contractual provisions...," the U.S. Justice Department said.
In a similar 2003 case in which it was accused of overbilling corporate clients, PWC settled its share of a class action suit for $54.5 million"
If you need assistance in rapidly and cost effectively managing your Sarbanes-Oxley compliance efforts, T&E and all other important areas, see www.issuescentral.com or call 800.410.6681 x 112 to learn more about the Compliance Playbook(tm).
"PWC settles false claims charges with $41.9 mln
Tue Jul 12, 2005 7:32 AM BST
WASHINGTON (Reuters) - Accounting firm PricewaterhouseCoopers has agreed to pay $41.9 million to settle charges that it made false claims to the U.S. government for travel reimbursement, the Justice Department said on Monday.
The settlement stemmed from charges that PWC failed to consistently disclose travel rebates it received for airline, hotel, rental car and other travel services and did not reduce the claims made to the government by the amounts of the rebates, the department said in a statement.
The accusations were first made in a whistle-blower lawsuit against the firm in 2001.
PWC spokeswoman David Nestor said the firm was "pleased to have resolved this matter with the federal government."
"The firm's former policy that gave rise to this matter was changed in 2001 before we were aware of any government investigation," Nestor said.
PWC "knowingly presented claims for payment to the United States for amounts greater than the travel expenses actually incurred and in violation of contractual provisions...," the U.S. Justice Department said.
In a similar 2003 case in which it was accused of overbilling corporate clients, PWC settled its share of a class action suit for $54.5 million"
If you need assistance in rapidly and cost effectively managing your Sarbanes-Oxley compliance efforts, T&E and all other important areas, see www.issuescentral.com or call 800.410.6681 x 112 to learn more about the Compliance Playbook(tm).
July 11, 2005
Corporate Travel Another Area for Improvement in a SOX era
Prior to Sarbanes-Oxley, there was much less accountabililty on corporate travel. These days, this is an area that is receiving increased scrutiny. As every area of the income statement and balance sheet is reviewed for proper controls, this one is a good one to review.
In my former life as an internal auditor, we found a great deal of fraud in T&E review-some of which was just the tip of the iceberg. Sounds like we can take our hats off to SOX for improving costs for corporations and not just increasing them.
As time goes on, we continue to hear about more benefits from Sarbanes-Oxley.
An excerpt from and MSNBC article is here:
"Haley Johnson, a regional sales manager for Continental Airlines Inc. in Atlanta, says travel is among the largest controllable expenses on the corporate ledger and provides a big opportunity for fraud.
With Sarbanes-Oxley, or SOX, "you need basically an end-to-end audit trail," Johnson says.
Richard Davis, director of travel management for Birmingham-based HealthSouth Corp., says many companies have made little effort in the past to manage travel expenses.
"As long as everybody got their flight, they didn't worry about how much it cost," he says. But now, corporations are taking a close look at all of their internal systems to see whether proper controls are in place to handle spending issues, and that has brought a lot of travel-related issues to light.
For a lot of companies, the biggest issue is simply getting a handle on the big travel picture, Davis says. For the complete article, www.issuescentral.com to learn more about the Compliance Playbook(tm) and help rapidly and cost effectively comply with Sarbanes-Oxley - even in the area of T&E.
In my former life as an internal auditor, we found a great deal of fraud in T&E review-some of which was just the tip of the iceberg. Sounds like we can take our hats off to SOX for improving costs for corporations and not just increasing them.
As time goes on, we continue to hear about more benefits from Sarbanes-Oxley.
An excerpt from and MSNBC article is here:
"Haley Johnson, a regional sales manager for Continental Airlines Inc. in Atlanta, says travel is among the largest controllable expenses on the corporate ledger and provides a big opportunity for fraud.
With Sarbanes-Oxley, or SOX, "you need basically an end-to-end audit trail," Johnson says.
Richard Davis, director of travel management for Birmingham-based HealthSouth Corp., says many companies have made little effort in the past to manage travel expenses.
"As long as everybody got their flight, they didn't worry about how much it cost," he says. But now, corporations are taking a close look at all of their internal systems to see whether proper controls are in place to handle spending issues, and that has brought a lot of travel-related issues to light.
For a lot of companies, the biggest issue is simply getting a handle on the big travel picture, Davis says. For the complete article, www.issuescentral.com to learn more about the Compliance Playbook(tm) and help rapidly and cost effectively comply with Sarbanes-Oxley - even in the area of T&E.
July 08, 2005
Small Business will be Held to Same Sarbanes-Oxley Standards
Many had hoped that with a new SEC chairman coming on board, that small business might be getting a break in compliance with Section 404 requirements. Much has been made of the cost of Sarbanes-Oxley with no apparent benefits. But if Senator Oxley is right, better get going on your compliance projects because there are no such changes in the offing.
An excerpt from an article on SOX and small business from www.ft.com
Mr Oxley told the International Corporate Governance Network (ICGN) annual conference: "After WorldCom happened it was difficult to legislate responsibly in that type of hot-house atmosphere. But I am proud of the bill. Compliance [with it] is an investment in the strength of the US capital markets."
Speaking to the Financial Times before his speech, Mr Oxley said: "If I had another crack at it, I would have provided a bit more flexibility for small- and medium-sized companies."
In response to concerns, the Securities and Exchange Commission is considering whether smaller public companies should abide by a different set of accounting and governance requirements compared with larger ones, to reduce costs.
However, Mr Oxley appeared to quash hopes that smaller companies would gain concessions as a result of the initiative. He said: "Congress will not re-visit this issue. The SEC reform [on smaller companies] is not going to happen either."
So if your company could use some help in rapidly and effectively complying with Sarbanes-Oxley, check out www.issuescentral.com\meth1.com and see how the Compliance Playbook(tm) can help cut cost, reduce time and provide benefits to your project.
An excerpt from an article on SOX and small business from www.ft.com
Mr Oxley told the International Corporate Governance Network (ICGN) annual conference: "After WorldCom happened it was difficult to legislate responsibly in that type of hot-house atmosphere. But I am proud of the bill. Compliance [with it] is an investment in the strength of the US capital markets."
Speaking to the Financial Times before his speech, Mr Oxley said: "If I had another crack at it, I would have provided a bit more flexibility for small- and medium-sized companies."
In response to concerns, the Securities and Exchange Commission is considering whether smaller public companies should abide by a different set of accounting and governance requirements compared with larger ones, to reduce costs.
However, Mr Oxley appeared to quash hopes that smaller companies would gain concessions as a result of the initiative. He said: "Congress will not re-visit this issue. The SEC reform [on smaller companies] is not going to happen either."
So if your company could use some help in rapidly and effectively complying with Sarbanes-Oxley, check out www.issuescentral.com\meth1.com and see how the Compliance Playbook(tm) can help cut cost, reduce time and provide benefits to your project.
July 07, 2005
Our Hearts Go Out to Londoners Today!
As an American, I know how hard it is when your country gets hit by terrorists. And it is always innocent people who suffer. There is so much panic and fear. You are changed forever in so many ways that are hard to imagine.
Please know that everyone in the world is thinking about you and wishes you well. You have our hopes and prayers. You are good friends and we will stand with you in your hour of need as you did with us after 9/11.
Please know that everyone in the world is thinking about you and wishes you well. You have our hopes and prayers. You are good friends and we will stand with you in your hour of need as you did with us after 9/11.
July 06, 2005
The New El Nino: Sarbanes-Oxley
Remember when everything that happened was due to El Nino? Well think of Sarbanes-Oxley as the new El Nino. People are blaming lower earnings, no interest in M&A and even considering de-listing.
See excerpt from an article here:
"Sarbanes-Oxley Costs Drag on Car-Mart ResultsBy Lance TurnerArkansasbusiness.com Daily Report - 7/6/05 12:04:51 PM
America's Car-Mart Inc. of Bentonville on Wednesday reported that quarterly income and earnings per share decreased 7 percent from the same quarter last year as Sarbanes-Oxley compliance costs weighed on results.
The used-car dealership chain said revenue increased 16 percent to $55.2 million, up from $47.7 million during the same quarter last year. But quarterly income and diluted earnings per share fell to $4.3 million and 36 cents, respectively, down from $4.6 million and 39 cents during the same quarter last year.
In a news release, Car-Mart attributed the income and earnings decrease to "external Sarbanes-Oxley compliance-related costs" of $700,000 during the quarter, with no such costs during the same quarter last year."
Sounds like they chould have managed their project better. $700K for a company that size is high. They probably were not familiar with the Compliance Playbook(tm).
To rapidly and cost effectively manage your Sarbanes-Oxley Compliance project, click on www.issuescentral.com\meth1.htm and learn more about the Sarbanes-Oxley Compliance Playbook(tm) or call (800) 410-6681 ext 114.
See excerpt from an article here:
"Sarbanes-Oxley Costs Drag on Car-Mart ResultsBy Lance TurnerArkansasbusiness.com Daily Report - 7/6/05 12:04:51 PM
America's Car-Mart Inc. of Bentonville on Wednesday reported that quarterly income and earnings per share decreased 7 percent from the same quarter last year as Sarbanes-Oxley compliance costs weighed on results.
The used-car dealership chain said revenue increased 16 percent to $55.2 million, up from $47.7 million during the same quarter last year. But quarterly income and diluted earnings per share fell to $4.3 million and 36 cents, respectively, down from $4.6 million and 39 cents during the same quarter last year.
In a news release, Car-Mart attributed the income and earnings decrease to "external Sarbanes-Oxley compliance-related costs" of $700,000 during the quarter, with no such costs during the same quarter last year."
Sounds like they chould have managed their project better. $700K for a company that size is high. They probably were not familiar with the Compliance Playbook(tm).
To rapidly and cost effectively manage your Sarbanes-Oxley Compliance project, click on www.issuescentral.com\meth1.htm and learn more about the Sarbanes-Oxley Compliance Playbook(tm) or call (800) 410-6681 ext 114.
July 04, 2005
Issues Central Commentary to the Ontario Securities Commission on MI 52 -11
June 29, 2005
Ontario Securities Commission
20 Queen Street West
Suite 1903
Toronto, ON M5H 3S8
Attention: Ms. Jo-Anne Matear, Senior Legal Counsel, Corporate Finance
Subject: Comments on the Proposed MI and CP 52-111 – Reporting on Internal Control Over Financial Reporting
Dear Ms. Matear:
We appreciate the opportunity to submit our comments to the OSC and other CSA members with respect to the Proposed Internal Controls Materials.
We applaud the majority of CSA members for seeking to improve the quality and consistency of the processes that control financial reporting. Investors are more likely to trust the financial information of an organisation with strong and formally documented internal controls than a firm that says “trust us”. We only have to look to the fallout from the Enrons, Worldcoms, and our own homegrown Bre-Xs for evidence.
Investor trust is priceless, and ironically less expensive.
Our organisation, Issues Central, Inc., was created with the mission to provide leading products and techniques to facilitate effective and efficient financial compliance (in accordance with legislation such as the Sarbanes-Oxley Act of 2002) for mid to emerging public companies. Our comments in this letter are based on practical industry experience with firms listed on all major exchanges in North America.
To be brief our review of the proposed materials has led to the following observations:
Observation 1 – In our opinion the proposed instrument is generally effective in addressing key concern areas and control points.
Observation 2 – The phase-in period extending out to 2008/2009 is too long for the smallest organizations (i.e – market cap less than $ 250 million). This exposes investors to a greater degree of risk than they should be required to bear and provides
too large a lag time for management teams. Inevitably, procrastination and staff turnover
will cause these smaller organisations to lose momentum. We understand that the purpose of the phase-in is to help address compliance cost and available resources. The upcoming revision to the COSO framework for smaller companies will partially address this concern, while the market to supply internal control services staff and products is in the process of addressing the imbalance between supply and demand for these same services. Our discussions with many smaller Canadian issuers has revealed that many of them are starting the process earlier than expected, so we do not believe that you will run into significant resistance by reducing the phase-in period. Investors will only benefit.
Observation 3 – Apply a limited variation on MI 52-111 to firms on the TSX Venture Exchange®. Why? Canadian markets will only benefit longer-term from having higher standards and this will ultimately drop the cost of capital to the issuers while improving investor confidence. Let’s face it, old impressions take a long time to change, and there is still a taste worldwide that Canada is the home of “VSE” type controls and reporting. Ironically, this proposed instrument as drafted and if implemented will no doubt further increase the long-term cost of capital for TSX Venture issuers leading to a further “ghettoization” of small issuers and reinforcing the “VSE” perception. We do not believe that this is good for investors, issuers, or the general perception of Canadian markets. If a company takes the public’s money they should be held to a common standard.
Thank you for your time.
Please contact me directly at 800.410.6681 ext 112 if you require additional input on the items above.
Sincerely,
Charley Best
Vice-President
Issues Central, Inc.
Developers of the Compliance Playbook™
www.issuescentral.com
Ontario Securities Commission
20 Queen Street West
Suite 1903
Toronto, ON M5H 3S8
Attention: Ms. Jo-Anne Matear, Senior Legal Counsel, Corporate Finance
Subject: Comments on the Proposed MI and CP 52-111 – Reporting on Internal Control Over Financial Reporting
Dear Ms. Matear:
We appreciate the opportunity to submit our comments to the OSC and other CSA members with respect to the Proposed Internal Controls Materials.
We applaud the majority of CSA members for seeking to improve the quality and consistency of the processes that control financial reporting. Investors are more likely to trust the financial information of an organisation with strong and formally documented internal controls than a firm that says “trust us”. We only have to look to the fallout from the Enrons, Worldcoms, and our own homegrown Bre-Xs for evidence.
Investor trust is priceless, and ironically less expensive.
Our organisation, Issues Central, Inc., was created with the mission to provide leading products and techniques to facilitate effective and efficient financial compliance (in accordance with legislation such as the Sarbanes-Oxley Act of 2002) for mid to emerging public companies. Our comments in this letter are based on practical industry experience with firms listed on all major exchanges in North America.
To be brief our review of the proposed materials has led to the following observations:
Observation 1 – In our opinion the proposed instrument is generally effective in addressing key concern areas and control points.
Observation 2 – The phase-in period extending out to 2008/2009 is too long for the smallest organizations (i.e – market cap less than $ 250 million). This exposes investors to a greater degree of risk than they should be required to bear and provides
too large a lag time for management teams. Inevitably, procrastination and staff turnover
will cause these smaller organisations to lose momentum. We understand that the purpose of the phase-in is to help address compliance cost and available resources. The upcoming revision to the COSO framework for smaller companies will partially address this concern, while the market to supply internal control services staff and products is in the process of addressing the imbalance between supply and demand for these same services. Our discussions with many smaller Canadian issuers has revealed that many of them are starting the process earlier than expected, so we do not believe that you will run into significant resistance by reducing the phase-in period. Investors will only benefit.
Observation 3 – Apply a limited variation on MI 52-111 to firms on the TSX Venture Exchange®. Why? Canadian markets will only benefit longer-term from having higher standards and this will ultimately drop the cost of capital to the issuers while improving investor confidence. Let’s face it, old impressions take a long time to change, and there is still a taste worldwide that Canada is the home of “VSE” type controls and reporting. Ironically, this proposed instrument as drafted and if implemented will no doubt further increase the long-term cost of capital for TSX Venture issuers leading to a further “ghettoization” of small issuers and reinforcing the “VSE” perception. We do not believe that this is good for investors, issuers, or the general perception of Canadian markets. If a company takes the public’s money they should be held to a common standard.
Thank you for your time.
Please contact me directly at 800.410.6681 ext 112 if you require additional input on the items above.
Sincerely,
Charley Best
Vice-President
Issues Central, Inc.
Developers of the Compliance Playbook™
www.issuescentral.com
