Saying that it places an excessive burden on community banks, a local trade group is asking the legislature for reforms to the Sarbanes-Oxley Act for its members. The group, Independent Community Bankers of America, said a survey of its members indicated that the average community bank spends more than $200,000 and devotes more than 2,000 staff hours to comply with Section 404 of SOX, and the group is asking for exemptions for banks with fewer than 3,000 shareholders. “Very often we’re talking about investors in small communities that know about the bank anyway,” said Chris Cole, regulatory counsel for ICBA, “and banks are already regulated and supervised so every 18 months they get these examinations that do check on these internal controls.” Under the FDIC Improvement Act, banks are subject to internal controls and certification by management and auditors much like what is required under the newer SOX legislation. But banks with assets under $500 million are exempt from those requirements, allowing smaller banks with fewer resources to avoid costly compliance procedures. But many community banks, even small ones, opt to go public in order to engage and involve the local community, and those with 500 or more shareholders, the current threshold, are required to comply with SOX. “If somebody doesn’t need to go public as part of their strategy, it doesn’t make sense (to incur the added cost),” said James D. Hicken, president and CEO of the Bank of Santa Clarita, a newly-formed community bank. “For us to really have an institution that represents the Valley, it really was important that stock could be purchased locally.” Bank of Santa Clarita has just raised a second offering, which may place the bank within the purview of SOX. Hicken said he and the rest of the bank’s management team weighed the potential cost of public status, but ultimately decided against seeking private investors. “We felt the benefits outweighed the cost,” said Hicken. Small banks are just one of the many companies in a variety of industries that are hoping to reform the legislation, which was developed in response to high-profile instances of accounting fraud and other improprieties by extremely large corporations. These small cap companies have long claimed that the cost of complying, which can run upwards of $1 million, even for small firms, unfairly penalizes them for transgressions of much larger businesses. Late last year, the U.S. Securities and Exchange Commission convened a panel to examine the impact of SOX on these small public companies and consider whether the costs of compliance are proportionate to the benefits, which is to ensure accurate and honest reporting for shareholders. Late last month the panel held meetings in Washington to discuss possible recommendations for the final report.