Overview of Sarbanes-Oxley compliance

A review is provided of those aspects of the Sarbanes-Oxley Act of 2002 that particularly affect financial institutions. Section 402 of the act generally prohibits a public company and its subsidiaries from extending credit, or arranging for another entity to extend credit, in the form of a personal loan to any director or executive officer of the public company. Section 301 of Sarbanes-Oxley requires public companies, including banks, to have an audit committee composed entirely of independent directors. Section 302(a) of Sarbanes-Oxley requires an issuer's principal executive and financial officers each to certify financial and other information contained in quarterly and annual reports. The new and more demanding rules under Section 16(a) under Sarbanes-Oxley make this an ideal time for issuers to reexamine their list of executive officers. Issuers should consider instituting preclearance procedures for all transactions by directors, officers and their family members. Officers, directors, and 10-percent shareholders should read and sign a company's new insider trading compliance procedures.