(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

Chamber of Commerce Panel Views Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002 was the subject of discussion at a recent U.S. Chamber of Commerce seminar during which individuals from both the public and private sector opined on matters ranging from the efficacy of the landmark legislation to the need for, and possibility of, a technical corrections amendment. The act will help restore investor confidence, but parts of the law may be counterproductive, according to George Kramer, vice president of the Securities Industry Association. Mr. Kramer said that there is more good than bad in the legislation, adding that over time the problems will likely be resolved.

The provision creating a public company accounting oversight board, a centerpiece of the law, will benefit individuals, Mr. Kramer said. He noted, however, that provisions mandating rules on analyst conflicts of interest are problematic. He said that these provisions resulted from the committee working from an old draft of New York Stock Exchange and Nasdaq proposals. Indeed, he continued, the committee included provisions that the SROs had discarded after receiving comments.

There has been some speculation about a technical corrections amendment to the Sarbanes-Oxley Act. Chamber of Commerce CEO Thomas Donahue said that the chamber intends" to have the last word" on the legislation through a likely technical corrections amendment, which he emphasized must be done after the November elections. Similarly, Greg Zernan, senior counsel to the House Financial Services Committee, said that since Congress "has never passed a perfect bill," it is likely that the act will be revisited. He also noted that by the time the bill went to conference it was clear that there was a lack of support for "tinkering" with the proposed measure. Mr. Zernan, added that, " while the law didn't turn out perhaps in the way that everyone would have hoped, it did provide much needed reforms at a critical time for reform. " Former Congressman David McIntosh, a partner with Mayer Brown Rowe & Maw, said that the degree of uncertainty about the impact of the law's new regulatory provisions and requirements " is still quite high." He pointed out that the law's corporate certification requirements create the possibility for disruption of long-standing regulatory relationships that the financial institutions have with the federal government. The act raises questions about the application of the certification of internal controls by financial institutions, he noted, given their traditional oversight by the banking agencies.

The Sarbanes-Oxley Act and the SEC rules it mandated require a company's chief financial officer and the chief executive officer to certify the accuracy of the financial statements and evaluate internal controls and new disclosure controls and procedures. The SEC rules require management to establish and maintain the controls. Since the regulations are similar to controls that bank examiners consider when they review a financial institution, noted Mr. McIntosh, the institutions need to know the impact under the Sarbanes-Oxley Act of either a positive or negative rating from bank examiners.

David Kornblau, chief litigation counsel in the SEC's Division of Enforcement, said that the staff is still trying to determine the meaning of the act's provisions, adding that the measure's unifying theme is to refocus all the elements of the securities laws on their ultimate purpose of investor protection. He also emphasized that the Sarbanes-Oxley Act sends a message to the business community that they are liable for the decisions they make and demonstrates congressional recognition of how serious securities fraud is to the typical investor.