Two Republicans from North Carolina plan to introduce legislation that would make compliance with certain provisions of Sarbanes-Oxley voluntary for banks, according to Crain's Financial Week.
Observers say the chance the proposal will pass is small, however.
During a Senate Banking Committee hearing yesterday, Sen. Elizabeth Dole said she wants to make compliance with Sections 302 and 404 — two of the most controversial provisions of Sarbanes-Oxley — voluntary for banks.
Ms. Dole claimed the provisions have “overburdened” financial institutions and may have exacerbated the current economic crisis.
North Carolina, which Ms. Dole represents, is home to several of the country’s largest banks, including
Bank of America and Wachovia.
In a statement released by her office, Ms. Dole noted: “We must ensure that businesses and shareholders receive benefits from these regulations that are commensurate with the burdens they create.
"This balance does not currently exist, and the costs of these requirements of Sarbanes-Oxley— while well intended—outweigh the benefits.”
Rep. Walter Jones introduced legislation last year that would allow bank holding companies, savings and loan holding companies and insured depositories to voluntarily opt out of Sections 302 and 404 certification requirements.
The bill languished in the House Financial Services Committee, but Mr. Jones has asked for a committee hearing on the issue.
Section 404, the most controversial of Sarbox’s many sections, requires public companies to assess their internal controls over financial processes and then have an external auditor verify that the controls work.
Several business groups — as well as lawmakers on both sides of the aisle—have said the section is too costly and detracts from the overall benefits of Sarbanes-Oxley. In her statement, Ms. Dole noted:
“For many banks, this has been one of the most costly requirements because it involves extensive testing and documentation.”
In response to such criticism, the Securities and Exchange Commission recently postponed the 404 compliance deadline for auditor attestation for small public companies until 2009.
The SEC is now conducting a study to evaluate the costs and benefits of the provision.
Section 302 requires executives such as the CEO and CFO to review and certify that internal controls were evaluated.
Such certifications, which also list significant changes to internal controls, must be included in financial reports, according to the provision.
Violations of Section 302 can result in both fines and jail time.
