FOR IMMEDIATE RELEASE
Ease Sarbanes-Oxley for Small Companies ICBA Tells the SEC
Current Regulatory Framework Encourages Move Toward Private Holdings
Washington, D.C. (May 10, 2006)—The Independent Community Bankers of America (ICBA) told federal securities regulators that costs for compliance with Sarbanes-Oxley remain too high for community banks and community bank holding companies.
"Unless something is done to ease the burden of Section 404, the number of banks seeking to go private may turn into a flood," ICBA said in a letter addressed to the Securities and Exchange Commission and the Public Company Accounting Oversight Board (PCAOB). "For many publicly held community banks and holding companies, the immediate response to the high costs of SOX has been to 'go private' and cease being registered SEC filers.
"The reasons cited for taking a community bank private uniformly include the increased legal and auditing 'hard costs' and management and staff time 'soft costs' associated with the Exchange Act, but unquestionably Section 404 compliance is the biggest concern." Going private impairs the ability of a community bank or holding company to raise capital and expand their lending activities in their local communities.
ICBA reiterated its strong support for the recommendations of the SEC Advisory Committee on Smaller Public Companies, particularly recommendations to exempt or partially exempt micro-cap and small cap companies from the internal control attestation and audit requirements of Section 404. If adopted by the SEC, the recommendations will significantly benefit hundreds of publicly held community banks and holding companies and free up resources for new lending and investment in local communities.
To keep audit costs from being artificially high, ICBA also asked the SEC and PCAOB to issue further guidance under Auditing Standard No. 2 (AS2) so that companies and auditors would understand what is considered material for an internal control audit under Section 404. ICBA also urged that AS2 be tiered to the size and complexity of the company. The complexity of audit testing required for large and complex banks with numerous affiliates is not necessary for a community bank.
Read ICBA's letter on www.icba.org.