February 23, 2007
Hedge Funds Dodge a Bullet!
The Bush Administration and Congress agree that US based Hedge funds do not need more oversight as originally recommended by Former SEC Chairman Donaldson recommended November, 2005.
Maybe with all the uproar about Sarbanes-Oxley Section 404, the Federal government does not have the stomach - going into an election year in 2008 - to enact investor protection legislation for Hedge funds.
Admittedly, these funds do not directly impact the average investor. However, their failures could have huge impact since banks and pension funds are investing in hedge funds in a big way. They are investing the average person's money into these highly speculative and risky funds. So the impact of failure of hedge funds is still a big issue in the market.
Let's hope there is not an Enron style or size failure in hedge funds that precipitates legislation too late and without a proper examination of the right cure.
"WASHINGTON, Feb. 22 — The Bush administration said Thursday that there was no need for greater government oversight of the rapidly growing hedge fund industry and other private investment groups to protect the nation’s financial system.
Instead, the administration, in an agreement it reached with the independent regulatory agencies, announced that investors, hedge fund companies and their lenders could adequately take care of themselves by adhering to a set of nonbinding principles."
Maybe with all the uproar about Sarbanes-Oxley Section 404, the Federal government does not have the stomach - going into an election year in 2008 - to enact investor protection legislation for Hedge funds.
Admittedly, these funds do not directly impact the average investor. However, their failures could have huge impact since banks and pension funds are investing in hedge funds in a big way. They are investing the average person's money into these highly speculative and risky funds. So the impact of failure of hedge funds is still a big issue in the market.
Let's hope there is not an Enron style or size failure in hedge funds that precipitates legislation too late and without a proper examination of the right cure.
"WASHINGTON, Feb. 22 — The Bush administration said Thursday that there was no need for greater government oversight of the rapidly growing hedge fund industry and other private investment groups to protect the nation’s financial system.
Instead, the administration, in an agreement it reached with the independent regulatory agencies, announced that investors, hedge fund companies and their lenders could adequately take care of themselves by adhering to a set of nonbinding principles."
February 14, 2007
The Results are in and High Standards and Enforcement Work!
The last few days events have been very interesting on the Compliance front. From the US to Canada to the UK, there is much to report and analyze.
In the US, Audit Analytics has interesting data on restatements to report for 2006, see the excerpt from the article below.
"Large companies filed 196 restatements last year, while companies with a market value of less than $75 million filed 1,108 restatements in 2006, a 42 percent year-over-year increase.
According to AuditAnalytics, a total of 1,876 restatements from both U.S. and foreign companies were filed with the Securities and Exchange Commission last year.
That’s up 17 percent from 2005, and dwarfs the 452 restatements filed in 2001 before the passage of the Sarbanes-Oxley Act and enactment of the internal control requirements outlined in the legislation."
Interesting indeed when you consider who has been getting the delays in SOX 404: the smaller companies. Sounds like we need to get this legislation going. Where there is smoke there is fire. Congratulations to the larger companies who are making big efforts in this area and seeing the improved results.
Which leads me to my next bit of news to share and analyze:
From the Canadian Securities Administrators (CSA), we have CSA 52-317 slipped in with the usual lack of publicity on February 9th. The regulator made the decision to delay the last phase of MI 52-109 ( a SOX 302/404 Lite) from effectively 2007 until 2008. While this may at first blush appear to allow the instrument to more closely align with dates for companies in the US for SOX 404, if you look a little more closely, it is a little different.
There has been little backlash against MI 52-109 in Canada. Why is that might you ask? Several reasons: 1) With very little education and information coming out of the CSA, many smaller companies do not even know the legislation exists and 2) The CSA may worry that if there is little compliance, and this is highlighted, markets could suffer greatly from loss of faith, so why not give more time and hope for the best!
If there is no change in enforcement from the CSA on the first phase of the legislation "Design and Implement" of internal control over financial reporting, then more time will not help the results. It will in fact cause a loss of momentum with high integrity companies and have no impact at all on those who are choosing not to comply.
What is interesting about the first two data points on the US and Canada is this:
1. Canada has predominantly more smaller public companies than the US.
2. If you assume that accounting standards in the US and Canada are similar (a fair assumption), then wouldn't one assume that many of those smaller Canadian public companies might have a statistically similar restatement possibility as US companies? That is a fair assumption.
3. This is especially true when you consider that one of the most prolific "serial restater" is Canadian (not small admittedly) and this is the land of BreX which was one of the larger frauds perpertrated on public markets. Out of that, Canadians got NI 43-101 STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS.
4. So it is interesting that the CSA chooses to delay the validation of the effectiveness of internal control over financial reporting after scolding public companies for non compliance in a previous notice, CSA 52-315.
Let's not wait for another major fraud in Canadian markets. The legislation is in place, it just needs to enforced for companies to take it seriously. Everyone is hurt by markets that have legislation in place but that is not enforced.
Speaking of no enforcement, interesting developments this week in the UK as well. Let's face it, AIM has been crowing about its market dominance. And American exchanges have been knashing their teeth and wringing their hands and trying to "throw SOX 404 under the bus" to be competitive with AIM markets.
Patience is all we needed. Where there are low standards, a certain type of company and investor goes. When this happens, it is only a matter of time until something that does not smell right is aired!
From an FT.com article, an excerpt about AIM listings and 2006 performance:
"Fewer companies listed on Aim last year than in 2005 and the overall market went nowhere. While the FTSE 250 rose 27 per cent and the FTSE 100 advanced 11 per cent, Aim rose by a pitiful 0.8 per cent.
Aim’s detractors point to this lacklustre performance as a sign that institutional and retail investors are becoming increasingly wary of the junior market and especially its newcomers from overseas...This was summed up by Martin Graham, director of markets at the LSE, last month. He said Aim was “a risk capital market”
Aim-listed Torex Retail sounded a profits warning and called for dealings in its shares to be suspended. A string of other Aim businesses also sounded profits warnings last Friday, including individual voluntary arrangement providers Accuma Group and Debt Free Direct."
So AIM markets are not for widows and orphans. Perhaps US and Canadian markets are for everyone: widows, orphans and the rest of us who would like to believe there are standards being developed, monitored and enforced by our regulators so that shares we have invested in do not suffer huge declines due to lack of transparency in reporting, or worse yet, fraud. Let's not give up because of political pressure or lack of enforcement. It is a good fight and the right one.
If your company needs assistance in the effective and sustainable compliance in SOX 404 or MI 52-109, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
In the US, Audit Analytics has interesting data on restatements to report for 2006, see the excerpt from the article below.
"Large companies filed 196 restatements last year, while companies with a market value of less than $75 million filed 1,108 restatements in 2006, a 42 percent year-over-year increase.
According to AuditAnalytics, a total of 1,876 restatements from both U.S. and foreign companies were filed with the Securities and Exchange Commission last year.
That’s up 17 percent from 2005, and dwarfs the 452 restatements filed in 2001 before the passage of the Sarbanes-Oxley Act and enactment of the internal control requirements outlined in the legislation."
Interesting indeed when you consider who has been getting the delays in SOX 404: the smaller companies. Sounds like we need to get this legislation going. Where there is smoke there is fire. Congratulations to the larger companies who are making big efforts in this area and seeing the improved results.
Which leads me to my next bit of news to share and analyze:
From the Canadian Securities Administrators (CSA), we have CSA 52-317 slipped in with the usual lack of publicity on February 9th. The regulator made the decision to delay the last phase of MI 52-109 ( a SOX 302/404 Lite) from effectively 2007 until 2008. While this may at first blush appear to allow the instrument to more closely align with dates for companies in the US for SOX 404, if you look a little more closely, it is a little different.
There has been little backlash against MI 52-109 in Canada. Why is that might you ask? Several reasons: 1) With very little education and information coming out of the CSA, many smaller companies do not even know the legislation exists and 2) The CSA may worry that if there is little compliance, and this is highlighted, markets could suffer greatly from loss of faith, so why not give more time and hope for the best!
If there is no change in enforcement from the CSA on the first phase of the legislation "Design and Implement" of internal control over financial reporting, then more time will not help the results. It will in fact cause a loss of momentum with high integrity companies and have no impact at all on those who are choosing not to comply.
What is interesting about the first two data points on the US and Canada is this:
1. Canada has predominantly more smaller public companies than the US.
2. If you assume that accounting standards in the US and Canada are similar (a fair assumption), then wouldn't one assume that many of those smaller Canadian public companies might have a statistically similar restatement possibility as US companies? That is a fair assumption.
3. This is especially true when you consider that one of the most prolific "serial restater" is Canadian (not small admittedly) and this is the land of BreX which was one of the larger frauds perpertrated on public markets. Out of that, Canadians got NI 43-101 STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS.
4. So it is interesting that the CSA chooses to delay the validation of the effectiveness of internal control over financial reporting after scolding public companies for non compliance in a previous notice, CSA 52-315.
Let's not wait for another major fraud in Canadian markets. The legislation is in place, it just needs to enforced for companies to take it seriously. Everyone is hurt by markets that have legislation in place but that is not enforced.
Speaking of no enforcement, interesting developments this week in the UK as well. Let's face it, AIM has been crowing about its market dominance. And American exchanges have been knashing their teeth and wringing their hands and trying to "throw SOX 404 under the bus" to be competitive with AIM markets.
Patience is all we needed. Where there are low standards, a certain type of company and investor goes. When this happens, it is only a matter of time until something that does not smell right is aired!
From an FT.com article, an excerpt about AIM listings and 2006 performance:
"Fewer companies listed on Aim last year than in 2005 and the overall market went nowhere. While the FTSE 250 rose 27 per cent and the FTSE 100 advanced 11 per cent, Aim rose by a pitiful 0.8 per cent.
Aim’s detractors point to this lacklustre performance as a sign that institutional and retail investors are becoming increasingly wary of the junior market and especially its newcomers from overseas...This was summed up by Martin Graham, director of markets at the LSE, last month. He said Aim was “a risk capital market”
Aim-listed Torex Retail sounded a profits warning and called for dealings in its shares to be suspended. A string of other Aim businesses also sounded profits warnings last Friday, including individual voluntary arrangement providers Accuma Group and Debt Free Direct."
So AIM markets are not for widows and orphans. Perhaps US and Canadian markets are for everyone: widows, orphans and the rest of us who would like to believe there are standards being developed, monitored and enforced by our regulators so that shares we have invested in do not suffer huge declines due to lack of transparency in reporting, or worse yet, fraud. Let's not give up because of political pressure or lack of enforcement. It is a good fight and the right one.
If your company needs assistance in the effective and sustainable compliance in SOX 404 or MI 52-109, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
February 13, 2007
SEC says Section 404 is being Copied...
Relief from Section 404 does not appear likely. The legislation is being copied in other jurisdictions. The US started a ball rolling and investors like the results. When you have high standards, many people will squawk but other markets will see the competitive advantage and follow.
See the comments from two SEC commissioners from the February 9th SEC meeting in Washington.
"SEC Commissioner Annette Nazareth, a Democrat, said at the conference she is seeing other markets adopt similarly tough rules over financial reporting even though Sarbanes-Oxley, most notably its internal control requirement contained in §404, has been greatly criticized.
"It is interesting that several jurisdictions are adopting regulations similar to SOX in an effort to improve investor protections, encourage private investment and as a result increase the depth of their markets," she said.
However, Casey, the newest commissioner and a Republican, said the SEC needs to continue reaching out to regulators both at home and abroad, and regulators "need to fix 404."
"The commission needs to continue in its efforts to engage cooperatively with other regulators both domestically and internationally," she said."
If your company needs assistance in the effective and sustainable compliance in SOX 404 or MI 52-109, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
See the comments from two SEC commissioners from the February 9th SEC meeting in Washington.
"SEC Commissioner Annette Nazareth, a Democrat, said at the conference she is seeing other markets adopt similarly tough rules over financial reporting even though Sarbanes-Oxley, most notably its internal control requirement contained in §404, has been greatly criticized.
"It is interesting that several jurisdictions are adopting regulations similar to SOX in an effort to improve investor protections, encourage private investment and as a result increase the depth of their markets," she said.
However, Casey, the newest commissioner and a Republican, said the SEC needs to continue reaching out to regulators both at home and abroad, and regulators "need to fix 404."
"The commission needs to continue in its efforts to engage cooperatively with other regulators both domestically and internationally," she said."
If your company needs assistance in the effective and sustainable compliance in SOX 404 or MI 52-109, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
February 02, 2007
Business and Politics...Be Careful Who you Think your Friends are
President Bush's approval ratings from the American public have risen slightly since the State of the Union address. You have to give this guy one thing: unlike prior administrations, he does not cave into pressure from polls.
In his speech to Wall Street earlier this week, the President stated that SOX 404 should be implemented differently not repealed. He is consistent. The interesting thing for people to remember about SOX 404 is that part of the legislation that people have the most issue with is the external auditor auditor attestation. Interestingly, this addition was done by Congress and would take "an act of congress to revoke". Even more interesting was that there was over whelming bi-partisan support for Sarbanes-Oxley at the time. So for those who hope that a democratic congress will help them out, don't hold your breath.
For instance, the Senate, under Senator Harry Reid's leadership passed an increase to the minimum wage with no tax breaks for smaller business. This does not seem very pro business. The House, on the other hand passed the bill for the increase with help for small business. We will see what the final bill has. President Bush is asking the Senate to put in help for small business.
The democrats are not pro business. Just yesterday "Senator Hillary Clinton of New York, a leading candidate for the Democratic presidential nomination in 2008, took direct aim yesterday at the oil companies' gains.
"Instead of lining the pockets of big oil, we need a new direction in energy policy that rewards innovation, creates jobs and reduces our dependence on foreign oil," she said in a statement.
She called for the elimination of "oil company tax breaks," with the additional revenue going to fund biofuels and other clean-energy technologies. "
Powerful democrats do not see business as the engine of America. They see it as something exploit and slash for the benefit of the little people.
Section 404 is great legislation. The SEC has provided more guidance to management and the PCAOB is working on a new audit standard. There is no rolling back the clock on this one.
If your company needs assistance in the effective and sustainable compliance in SOX 404 or MI 52-109, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
In his speech to Wall Street earlier this week, the President stated that SOX 404 should be implemented differently not repealed. He is consistent. The interesting thing for people to remember about SOX 404 is that part of the legislation that people have the most issue with is the external auditor auditor attestation. Interestingly, this addition was done by Congress and would take "an act of congress to revoke". Even more interesting was that there was over whelming bi-partisan support for Sarbanes-Oxley at the time. So for those who hope that a democratic congress will help them out, don't hold your breath.
For instance, the Senate, under Senator Harry Reid's leadership passed an increase to the minimum wage with no tax breaks for smaller business. This does not seem very pro business. The House, on the other hand passed the bill for the increase with help for small business. We will see what the final bill has. President Bush is asking the Senate to put in help for small business.
The democrats are not pro business. Just yesterday "Senator Hillary Clinton of New York, a leading candidate for the Democratic presidential nomination in 2008, took direct aim yesterday at the oil companies' gains.
"Instead of lining the pockets of big oil, we need a new direction in energy policy that rewards innovation, creates jobs and reduces our dependence on foreign oil," she said in a statement.
She called for the elimination of "oil company tax breaks," with the additional revenue going to fund biofuels and other clean-energy technologies. "
Powerful democrats do not see business as the engine of America. They see it as something exploit and slash for the benefit of the little people.
Section 404 is great legislation. The SEC has provided more guidance to management and the PCAOB is working on a new audit standard. There is no rolling back the clock on this one.
If your company needs assistance in the effective and sustainable compliance in SOX 404 or MI 52-109, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
