ICBA News Release
FOR IMMEDIATE RELEASE
ICBA Urges SOX Reform for Community Banks
Participates in House Small Business Committee Roundtable
Washington, D.C. (October 27, 2005) - The Independent Community Bankers of America (ICBA) told Democratic members of the House Committee on Small Business today that the Sarbanes-Oxley Act of 2002 (SOX) disproportionately impacts community banks and urged further changes to the securities laws to reduce unnecessary burden.
"Many publicly held community banks and holding companies simply don't have the resources to comply with the law," Chris Cole, ICBA regulatory counsel told the committee. "The average community bank expects to spend more than $200,000 and devote over 2,000 staff hours to comply with Section 404 of SOX, a recent ICBA survey of its members showed. Some community banks are considering going private because of concerns associated with the high cost of SOX requirements. More than 60 community banks nationwide have filed to go private since the beginning of 2003."
At the roundtable discussion, ICBA recommended:
- Updating or increasing the threshold requirement under the Securities Exchange Act of 1934 from 500 registered shareholders to 3,000 so that more companies would be exempt from SOX requirements, to take account of market changes since 1964 when the law was last amended;
- Since community banks are highly regulated and supervised to ensure adequate internal controls, establishing a community bank exemption from internal control requirements of SOX Section 404 similar to the FDIC exemption from the internal control requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). The FDIC has proposed raising the FDICIA exclusion so that banks with less than $1 billion in assets would be exempted;
- Scaling the application of SOX Auditing Standard No. 2 to the complexity and size of a company so that community banks are not subject to the same type of internal control testing and auditing as large institutions; and
- Revising SEC Regulation S-B to streamline disclosure requirements for smaller companies.
Separately, ICBA commends the SEC for actions already taken to ease the regulatory burden on community banks. Among them are extending the SOX Section 404 phase-in period for one additional year for non-accelerated filers, for proposing a revision to the periodic report filing deadlines for accelerated filers, and for considering a revision to the definition of accelerated filer. ICBA had previously recommended these actions to the SEC Advisory Committee on Smaller Public Companies.