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Financial Services Chief Welcomes Tough Disclosure Rules

Some U.S. business leaders are complaining about complex new disclosure rules that were imposed in the wake of recent financial scandals. But a leader in the financial services industry welcomes the regulations, which he says may lead to a new era of accountability in business. James Quigley, chief executive of Deloitte & Touche USA, spoke with VOA's Mike O'Sullivan in Los Angeles.

Deloitte & Touche is part of a $15 billion financial services firm, one of only four that serve most of the world's leading corporations. A fifth, the now-defunct accounting business Arthur Andersen, was brought down in the scandal surrounding the energy company Enron, which collapsed three years ago.

Deloitte and its competitors - Ernst & Young, KPMG, and PricewaterhouseCoopers - are now working to implement the new rules intended to prevent another Enron.

Congress enacted tough disclosure requirements under the 2002 Sarbanes-Oxley Act, and the rules are going into effect this year and next year. They are intended to reduce conflicts of interest and promote transparency. Top corporate officers must now certify financial statements for accuracy, and the officers are subject to criminal penalties if they lie.

James Quigley says the biggest casualty of the Enron debacle was investor confidence, and the new rules, while burdensome, will help restore it.

"The challenge is more than just a few bad apples," he said. "You also need an effective corporate governance model in place, and the way that you reinforce ethics and the way that you reinforce these values is through training, through education."

Mr. Quigley says standards must be set at the top of the business world, and that executives must reinforce a company's ethical message.

Some provisions of Sarbanes-Oxley have stirred little controversy, for example, those that protect whistle-blowers, employees who report wrongdoing. But many business leaders complain about the cost of implementing the added disclosure requirements. The financial services chief says the investment will be worth it.

"I absolutely believe the long-term benefits are there because of the huge value that trust and confidence represent in our capital markets," he said. And it was badly shaken by these corporate scandals. And these significant changes were legislated and required, and we need now to implement them and get on with it."

Mr. Quigley says parts of Sarbanes-Oxley may need to be fine-tuned, but that the most sweeping reforms in recent corporate history will be worth the cost and effort of implementation.