find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Real Estate & Projects Lawyer (6+ years PAE)
Category: Property Law | Location: Sydney CBD, Inner West & Eastern Suburbs Sydney NSW
· Top tier firm with offices nationally · High profile clients
View details
SOX may force banks to go private

SOX may force banks to go private

THE IMPACT of the Sarbanes-Oxley Act (SOX) could force smaller retail financial institutions in the US to sell up or go private, a new study has warned, stoking fears of a knock on effect here.…

THE IMPACT of the Sarbanes-Oxley Act (SOX) could force smaller retail financial institutions in the US to sell up or go private, a new study has warned, stoking fears of a knock on effect here.

The Act, passed in response to the collapse of Enron, is having a disproportionate impact on smaller and mid-size firms with smaller technology budgets and this may cause them to explore potential mergers or, in extreme situations, delisting to avoid compliance altogether, US research firm TowerGroup said.

“For certain, smaller, financial institutions, compliance may ultimately affect their overall business model,” said Craig Focardi, research director at TowerGroup. “Sarbanes-Oxley increases concerns about risk within publicly traded community banks. Compliance costs and process improvements can quickly absorb a large percentage of corporate profits within these types of institutions.”

A recent study found that the average community bank in the US spends more than $200,000 on compliance and some 2,000 staff hours solely to comply with Section 404 of the act.

The Tower research also revealed several pitfalls to avoid for Australian organizations looking at SOX compliance. A common mistake of diversified financial services providers was their failure to shift quick-fix compliance maintenance towards permanent, replicable solutions. Moreover, lending institutions have tended to develop compliance processes to fit individual lines of business and laws. Businesses must develop compliance systems that they can reuse across the entire enterprise. Luckily, the latency period on SOX compliance for firms not headquartered outside the US has allowed Australian firms to avoid the mistakes of their US peers.

“If you go and buy the software and then try and apply it across the business, you’re going to fall flat on your face,” said Peter Whyntie, head of risk management and compliance at Zurich Financial Services. “We did months of work on designing compliance plans, how they would work, what kind of framework we wanted, where we wanted our compliance manager and what kind of questions we wanted to ask. Then we went and looked for software and went to each software provider with out blueprint and said you tell us how you can help us get there. Don’t send me a spec on your software — I’m not interested. Come to me with a proposal — that made it a lot easier.”

Here there has been increasing talk of Sarbanes-Oxley becoming the de-facto global standard. Business figures said a situation may arise where companies compliant with Sarbanes-Oxley may demand that counterparties and business partners not bound by the Act have compliant systems, with the lack of systems leading to risk premiums being charged.

But there is growing concern over the focus of some Sarbanes-Oxley software being used in Australia. Internal auditors said that Big Four accounting firm solutions being used by 60 per cent of surveyed organisations here, focus primarily on financial controls, not operational controls.

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weeklys sister publication

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

SOX may force banks to go private
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Aug 21 2017
Is your firm on the right track for gig economy gains?
Promoted by Crowd & Co. The way we do business, where we work, how we engage with workers, ev...
Scales of Justice, Victorian County Court, retiring judges
Aug 21 2017
Replacements named for retired Vic judges
Two new judicial officers have been appointed in the Victorian County Court, following the retire...
Applauds
Aug 21 2017
LCA applauds proposed Modern Slavery Act
The Law Council of Australia has welcomed new recommendations for the development of a Modern Slaver...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...