August 22, 2007
What about Disclosures on Asset Backed Commercial Paper?
With the the potential risk around Asset Backed Commercial Paper (ABDP), you would think there would be more disclosures about who is exposed. Aren't public companies supposed to be doing real time disclosures about real time events? Over investing in ABDP is now a material event.
The interesting thing for some of the mining companies in Canada who have reported tying up 90% plus of their free cash in non-bank ABDP's is: Wow, what were you thinking? Is that little extra bit of return worth the risk?
A billionare from Little Rock, Arkansas, Witt Stephens who founded and ran the largest off-Wall Street brokerage, once told one a customer: "The most important thing in investing your money is protect your principal!" I guess these mining companies and many others never had the opportunity to learn from a master such as Witt Stephens.
Here is an excerpt from an article from Today's Toronto Star:
"The chiefs of Canada's major banks yesterday pledged a concerted effort to ensure the massive market for bank-sponsored asset-backed commercial paper continues to "perform satisfactorily," while some in the investment industry wondered just who is sitting on an estimated $33 billion in non-bank-sponsored paper.
Short-term commercial debt, an erstwhile favourite with institutional investors, has been slammed by a liquidity crisis in recent weeks as turmoil that began with U.S. subprime mortgages spilled into other sectors of the credit market.
The total market for asset-backed commercial paper, known as ABCP, is worth some $120 billion, with the vast majority sold by bank-run trusts. While that segment of the market continues to run smoothly, commercial paper sold by non-bank companies, worth about $35 billion, has been rocked by volatility.
Earlier this week, the National Bank of Canada decided to shield its clients from potential losses by repurchasing about $2 billion worth of the non-bank variety from its money market funds, while raising the question of where the other $33 billion is being held.
Investors got some answers yesterday as companies issued a flurry of releases to clarify their levels of exposure. Among them, the Laurentian Bank of Canada said it has "limited exposure" on the order of about $20 million..."
The interesting thing for some of the mining companies in Canada who have reported tying up 90% plus of their free cash in non-bank ABDP's is: Wow, what were you thinking? Is that little extra bit of return worth the risk?
A billionare from Little Rock, Arkansas, Witt Stephens who founded and ran the largest off-Wall Street brokerage, once told one a customer: "The most important thing in investing your money is protect your principal!" I guess these mining companies and many others never had the opportunity to learn from a master such as Witt Stephens.
Here is an excerpt from an article from Today's Toronto Star:
"The chiefs of Canada's major banks yesterday pledged a concerted effort to ensure the massive market for bank-sponsored asset-backed commercial paper continues to "perform satisfactorily," while some in the investment industry wondered just who is sitting on an estimated $33 billion in non-bank-sponsored paper.
Short-term commercial debt, an erstwhile favourite with institutional investors, has been slammed by a liquidity crisis in recent weeks as turmoil that began with U.S. subprime mortgages spilled into other sectors of the credit market.
The total market for asset-backed commercial paper, known as ABCP, is worth some $120 billion, with the vast majority sold by bank-run trusts. While that segment of the market continues to run smoothly, commercial paper sold by non-bank companies, worth about $35 billion, has been rocked by volatility.
Earlier this week, the National Bank of Canada decided to shield its clients from potential losses by repurchasing about $2 billion worth of the non-bank variety from its money market funds, while raising the question of where the other $33 billion is being held.
Investors got some answers yesterday as companies issued a flurry of releases to clarify their levels of exposure. Among them, the Laurentian Bank of Canada said it has "limited exposure" on the order of about $20 million..."
August 21, 2007
Michael Oxley Speaks about SOX on the Fifth Anniversary
Michael Oxley is precisely right. The Sarbanes-Oxley Act has been a good thing for US markets. And he is right about the impact on standards in other markets. Examples are Canada with its NI 52-109 which is about 80% the same as SOX 302/404 but excludes the external auditor attestation; other examples are Japan with its JSOX and India is also moving toward more transparency in reporting as well.
Sarbanes-Oxley has now reached the optimal point. Auditors now do not have to opine on a registrant's process for its internal control over financial reporting project. The auditors must opine on the adequacy of a company's internal control over financial reporting. As well, the Public Company Accounting Oversight Board (PCAOB) has revised its audit standard and it now is scaled back and emphasizes a risk based approach to audits.
All these changes have been in response to huge public outcry. But good for the SEC that they have not tried to neuter the legislation. Good work but hard work.
Here is an excerpt from Michael Oxley's podcast:
"In a podcast interview with Gartner Inc. analysts Bruce Bond and Vincent Oliva to mark the fifth anniversary of the introduction of the act, Mr Oxley said that although there is evidence that some European financial markets are becoming increasingly attractive, the US is still regarded as the safest and fairest of international markets with the highest standards.
Mr Oxley, currently vice chairman of the NASDAQ stock exchange, also said that since the introduction of SOX in the US, many countries, bothdeveloped and developing, have moved towards higher standards of cor-porate governance and listing requirements. The predicted 'race towards thebottom' that was widely predicted after the New York Stock Exchange and NASDAQ tightened their listing standards has failed to materialise. "
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, 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.
Sarbanes-Oxley has now reached the optimal point. Auditors now do not have to opine on a registrant's process for its internal control over financial reporting project. The auditors must opine on the adequacy of a company's internal control over financial reporting. As well, the Public Company Accounting Oversight Board (PCAOB) has revised its audit standard and it now is scaled back and emphasizes a risk based approach to audits.
All these changes have been in response to huge public outcry. But good for the SEC that they have not tried to neuter the legislation. Good work but hard work.
Here is an excerpt from Michael Oxley's podcast:
"In a podcast interview with Gartner Inc. analysts Bruce Bond and Vincent Oliva to mark the fifth anniversary of the introduction of the act, Mr Oxley said that although there is evidence that some European financial markets are becoming increasingly attractive, the US is still regarded as the safest and fairest of international markets with the highest standards.
Mr Oxley, currently vice chairman of the NASDAQ stock exchange, also said that since the introduction of SOX in the US, many countries, bothdeveloped and developing, have moved towards higher standards of cor-porate governance and listing requirements. The predicted 'race towards thebottom' that was widely predicted after the New York Stock Exchange and NASDAQ tightened their listing standards has failed to materialise. "
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, 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.
August 07, 2007
Interesting Viewpoint On SOX from China
Everything is about perspective. This article from the Standard Chinese newspaper speaks about the fifth anniversary of Sarbanes Oxley. This journalist discusses the pros and cons of regulation in markets. It is quite interesting the approach that he takes regarding regulation. He notes that many people find any regulations authoritarian. He indicates that regulations if well done are actually support for business.
This is quite interesting considering the uproar and furor that has gone concerning Sarbanes Oxley over the past five years. This journalist takes a different approach and indicates that China may do well to consider something like a Sarbanes Oxley because there is so much uncertainty about business and ethics in China.
He indicates that many in the West believe that Sarbanes Oxley is in fact authoritarian but he indicates that in China they know where authoritarian is and is something quite different than Sarbanes Oxley. He believes that the struggle to validate business in China while moving towards democracy is a challenge and cannot occur without the proper regulations.
This is quite refreshing and quite instructive for those of us who have done so much review on this legislation. It must be amusing to this reporter level of whining and Chicken Little types of arguments that occurred regarding this legislation.
We on this blog have often indicated our support for Sarbanes Oxley and continue to do so. But must admit of this approach is very unique and it always is interesting to hear from someone with a completely different perspective that is completely valid in a much different way.
For the complete article, click here. Here is an excerpt:
"Truth be known, today's business could not operate without regulations. The introduction of the joint stock company as a structure and the subsequent invention of limited shareholder liability in the early nineteenth century, ensuring shareholders are only liable to lose the amount they have invested in the advent of a company's insolvency, were all regulatory instruments designed not to block the flow of business but to free it up.
Middle-class shareholders in the 18th century - we might call them retail shareholders today - would not have felt enough confidence in investing in, say, steam-driven infrastructure or other industrial revolution advancements without the back-up of governments in the shape of such laws.
It is likely, therefore, that those developments, leading to amassing of great fortunes, an extraordinary distribution of wealth, and the establishment of the modern capitalist model, would not have occurred without government regulation.
In fact, rather than calling it "regulation," we might call it "support."
Every business utilizes what has become known as a "license to operate." This is a license effectively held by the wider society and generally - though not always - entrusted to governments, which allows businesses to function and be accepted in a wider sense...
China, if it is put into action Deng's epithet "Capitalism with Chinese characteristics," needs to balance the power of business with the rights of the people. This is particularly problematic in an authoritarian state run by a government obsessed with holding onto the reins and keeping the largest national population in the world from tilting towards Western-style democracy.
Capital flight is not an issue for China. Civil unrest is more likely and corruption and graft is a major issue driving it. So perhaps it might be the moment to introduce stronger regulations - a la SOx - to enable something like a free market to run effectively and equitably.
But, that pro-business balance has to be maintained. Without a democratic system, feedback loops are tangled or non-existent and this may lead to poorly devised schemes, bad policy and, eventually, bad laws. Bad laws do not help anyone.
Many people see SOx as a form of US authoritarianism, placing obstacles in front of the free market beast that has thrived there for decades.
Those in China know what authoritarianism is, and SOx isn't it.
China needs some strong corporate laws to ensure the economy doesn't eat itself. Beijing could do worse than to look closely at SOx.
James Rose is editor of www.corporategovernance-asia.com"
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, 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.
This is quite interesting considering the uproar and furor that has gone concerning Sarbanes Oxley over the past five years. This journalist takes a different approach and indicates that China may do well to consider something like a Sarbanes Oxley because there is so much uncertainty about business and ethics in China.
He indicates that many in the West believe that Sarbanes Oxley is in fact authoritarian but he indicates that in China they know where authoritarian is and is something quite different than Sarbanes Oxley. He believes that the struggle to validate business in China while moving towards democracy is a challenge and cannot occur without the proper regulations.
This is quite refreshing and quite instructive for those of us who have done so much review on this legislation. It must be amusing to this reporter level of whining and Chicken Little types of arguments that occurred regarding this legislation.
We on this blog have often indicated our support for Sarbanes Oxley and continue to do so. But must admit of this approach is very unique and it always is interesting to hear from someone with a completely different perspective that is completely valid in a much different way.
For the complete article, click here. Here is an excerpt:
"Truth be known, today's business could not operate without regulations. The introduction of the joint stock company as a structure and the subsequent invention of limited shareholder liability in the early nineteenth century, ensuring shareholders are only liable to lose the amount they have invested in the advent of a company's insolvency, were all regulatory instruments designed not to block the flow of business but to free it up.
Middle-class shareholders in the 18th century - we might call them retail shareholders today - would not have felt enough confidence in investing in, say, steam-driven infrastructure or other industrial revolution advancements without the back-up of governments in the shape of such laws.
It is likely, therefore, that those developments, leading to amassing of great fortunes, an extraordinary distribution of wealth, and the establishment of the modern capitalist model, would not have occurred without government regulation.
In fact, rather than calling it "regulation," we might call it "support."
Every business utilizes what has become known as a "license to operate." This is a license effectively held by the wider society and generally - though not always - entrusted to governments, which allows businesses to function and be accepted in a wider sense...
China, if it is put into action Deng's epithet "Capitalism with Chinese characteristics," needs to balance the power of business with the rights of the people. This is particularly problematic in an authoritarian state run by a government obsessed with holding onto the reins and keeping the largest national population in the world from tilting towards Western-style democracy.
Capital flight is not an issue for China. Civil unrest is more likely and corruption and graft is a major issue driving it. So perhaps it might be the moment to introduce stronger regulations - a la SOx - to enable something like a free market to run effectively and equitably.
But, that pro-business balance has to be maintained. Without a democratic system, feedback loops are tangled or non-existent and this may lead to poorly devised schemes, bad policy and, eventually, bad laws. Bad laws do not help anyone.
Many people see SOx as a form of US authoritarianism, placing obstacles in front of the free market beast that has thrived there for decades.
Those in China know what authoritarianism is, and SOx isn't it.
China needs some strong corporate laws to ensure the economy doesn't eat itself. Beijing could do worse than to look closely at SOx.
James Rose is editor of www.corporategovernance-asia.com"
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, 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.
