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As the Securities and Exchange Commission began implementing tougher accountability rules on corporate managers Tuesday, the question remained: Are companies — and the SEC itself — ready for the sweeping changes ahead? For the first time since Chairman Harvey Pitt was sworn in a year ago, the regulatory body had its full complement of five commissioners. They approved new rules to accelerate the filing requirement deadline for insider transactions by officers, directors and principal securities holders to two business days. The commissioners also approved new rules that would require chief executives and chief financial officers to certify a company’s quarterly and annual reports. It wasn’t the first time the SEC dealt with the CEO and CFO certification issue. It was the regulatory body that imposed an Aug. 14 deadline on 947 publicly traded companies that required the CEOs and CFOs of those entities to sign off on the financials to appear in quarterly statements. The SEC did that in an attempt to quickly restore investor confidence in the equity markets in the aftermath of several accounting scandals. But it’s the Sarbanes-Oxley Act, signed into law by President Bush in July, that makes those certifications a permanent fixture in the nation’s laws. Under the act, the SEC must incorporate the rules within its regulations. That’s the action the commissioners took Tuesday. Thus, the provisions of Sarbanes-Oxley go into effect today, meeting the 30-day deadline imposed by the law. Also on Tuesday, the SEC voted to accelerate the filing of corporate quarterly reports from 45 days after the quarter to 35 days, and, for annual reports, from 90 days after the year ends to 60 days. This measure is part of SEC rulemaking, separate from Sarbanes-Oxley, and will have a three-year phase-in period. There will be no changes in the first year. With a two-day window for companies to begin meeting the certification requirements, Pitt readily admitted that the regulator doesn’t have the resources to determine if companies comply. He said he’s concerned that there will be “spurious filings or nonfilings, and it’ll take us a bit of time to catch up with them.” Some securities attorneys believe Sarbanes-Oxley will further strain the SEC’s scant resources and manpower, but they also think the regulatory body is up to the task. “It is quite an accomplishment that the SEC met the 30-day deadline,” said David A. Sirignano, an attorney with Morgan, Lewis & Bockius in Washington. “It did demonstrate that they are ready to meet their obligations under the statute.” There are many more phases of the legislation that the SEC will have to implement. By January, for example, the SEC must approve rules requiring self-regulating organizations to not list companies unless they meet certain corporate governance standards. Meanwhile, companies are struggling to make sense of the far-reaching law. Called “the most sweeping legislation since the New Deal” by new SEC Commissioner Harvey Goldschmid, the Sarbanes-Oxley Act imposes new requirements on companies, corporate insiders and accountants. “It covers almost everyone in the securities industry in a very wide sweep,” said Peter J. Romeo, a partner at law firm Hogan & Hartson and a former SEC lawyer. “It’s the most significant initiative since the mid-1930s.” Even so, the legislation has caught many companies flat-footed. “Companies are already experiencing a considerable amount of turmoil,” Romeo added, “and the [speedy implementation of some provisions] are creating a great deal of unrest.” While the measures adopted by the SEC Tuesday are long overdue, it is uncertain if they will be effective or if they will add to the cost of doing business in the United States, said Gregory S. Bruch, partner at law firm Foley & Lardner in Washington. “It is too early to tell,” Bruch said, “but it is costing corporations real dollars and cents to make these changes. It’s quite a task to keep up with this, but corporations don’t really have a choice.” Copyright �2002 TDD, LLC. All rights reserved.

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