(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.)

Federal Reserve Board Implements Sarbanes-Oxley Act

The Federal Reserve Board has adopted an interim final rule implementing provisions of the recently enacted Sarbanes-Oxley Act for state member banks covered by Exchange Act reporting requirements. The rule reflects amendments to Section 12(i) of the Exchange Act, which vests the Board with the authority to administer several of the enhanced reporting, disclosure and corporate governance obligations imposed by the Sarbanes-Oxley Act. The interim rule is effective immediately, and comments on it can be submitted until October 15, 2002.

The Sarbanes-Oxley act amended Exchange Act Section 12(i) to make it clear that the federal banking agencies have the authority to administer and enforce various provisions of the act, including the certification mandated by Section 302, which requires that senior officers certify that the bank's financial statements fairly present the institution's financial condition. Another provision subject to Federal Reserve enforcement is the requirement that senior officers disgorge bonuses and stock sale profits when there are accounting restatements resulting from material noncompliance with SEC rules.

Under the interim rule, the Federal Reserve Board will also enforce a provision in the Sarbanes-Oxley Act which prohibits directors and executive officers from trading in company stock during a blackout period when employees are prevented from selling company stock in their 401(k) plans. With regard to corporate governance, the Federal Reserve Board will administer and enforce the Sarbanes-Oxley Act mandates involving audit committees, codes of ethics and internal controls for financial reporting.