ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release November 27, 2002 #02-60
E-mail: [email protected]

ACB URGES SEC TO TAKE INTO ACCOUNT LIMITED STAFF RESOURCES OF COMMUNITY BANKS

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WASHINGTON, D.C. — America’s Community Bankers urged the Securities and Exchange Commission today to keep in mind the more limited staff resources of community banks when finalizing rules under the Sarbanes-Oxley Act.

In its comment letter, ACB said it supports the goals of strengthening corporate governance and financial disclosures, and asked the SEC to make improvements in the proposal’s three provisions.

• Financial Expert. ACB said the narrow definition of “financial expert” will make it difficult for community banks, as well as larger companies, to find qualified candidates willing to serve. The definition should be broadened to take into account “the experience and education necessary to understand the business engaged in by the company and to faithfully and competently fulfill the role designated for the audit committee members,” ACB said. In addition, “a company should be permitted to make a positive disclosure if the audit committee members collectively meet the qualifications of a financial expert.”

“Although we believe it would be a best practice for the financial expert to be independent, this should not be a requirement as long as the lack of independence of the financial expert is disclosed to investors,” ACB added.

• Ethics Code. ACB recommended extending ethics code disclosures to a company’s directors, chief executive officers and all other employees, even though not required by the Sarbanes-Oxley Act. ACB said the disclosures should cover only material changes and waivers “to avoid overwhelming investors with insignificant information and to encourage adoption of comprehensive codes,” ACB said.

The two-business day reporting deadline should be extended to 10 calendar days. ACB said the proposed short deadline “is unreasonable in light of the limited staff resources of small public companies.”

• Internal Controls. ACB said the internal control report, assessment and attestation requirement “should mirror the similar banking law requirements imposed by the Federal Deposit Insurance Corporation Improvement Act.” This would include exempting depository institutions with less than $500 million in assets or their holding companies from the requirements. Larger institutions and their holding companies should be allowed to comply with FDICIA requirements.

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In another comment letter, ACB said it has concerns with the proposed list of actions the SEC identified as possibly constituting improperly influencing the conduct of an audit. “The concern is heightened by the fact that the SEC has converted what appears in the law to be a liability standard of willful or intentional conduct into a negligence standard. ACB is concerned that the change in the liability standard will have a chilling effect on the normal, legitimate communication necessary between management of a company and its legal counsel and auditors,” ACB said.

Disclosure Comment Letter

Auditor Comment Letter

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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