This week I decided to talk to some company executives about how they feel Bermuda is being affected by the regulatory changes put into place by the US government as a result of the failures of Enron, Tyco, Global Crossing, Worldcom, and JC Penny to name a few.

Several of these failed companies had their corporate headquarters in Bermuda but had no real connection to the Island and have added nothing to our economy. However, their failures have helped to bring worldwide attention to the need for improved internal controls.

Corporate Governance, according to some business leaders, is a much broader issue than it ever was. Therefore many companies are spending more time with their lawyers in an effort to understand what is required of them from a corporate reporting and disclosure perspective.

The new rules are fairly complicated and need further scrutiny by a trained legal eye. As a result many companies anticipate higher legal fees as they familiarise themselves with the new rules.

Proper disclosure of off balance sheet deals is under intense scrutiny by the Securities and Exchange Commission (SEC) and the analysts reviewing companies. Failure to disclose even the minutest detail could result in a company facing severe penalties. Any type of financing transaction done off the balance sheet must be properly disclosed. If properly disclosed, then companies will face no penalties, as many off balance sheet deals are perfectly legitimate. The issue surrounding off balance sheet deals is not one of legitimacy but rather one of transparency.

One leading executive said Tyco's failure could have happened anywhere.

Tyco's downfall had nothing whatsoever to do with the fact that its corporate headquarters was in Bermuda. Rather, a mixture of corporate governance breakdown and inappropriate behaviour by its senior management caused its ultimate demise.

Many feel that Bermuda companies play by the rules just like any other major publicly traded company does anywhere else in the world. Essentially the standard of corporate governance and adherence to the rules and regulations of conducting business are the same here as they are anywhere in the world.

As with any domicile there will be some glitches along the way but that is just the nature of the business world. Some companies will be more ethical than others and it does not matter where they are domiciled.

Some of the new rules that Bermuda international companies along with their counterparts on a worldwide basis are dealing with are very technical and detail oriented. An example given was if a corporate director wants to sell or buy stock, his action must be reported to the SEC within two days of the transaction.

If a company is so much as one day late, it must file a proxy statement (A document which the SEC requires a company to send to its shareholders that provides material facts concerning matters on which the shareholders will vote) to let everyone know there was a mistake. The expense and extra work necessary to file proxy statements for a matter as trivial as one day's late reporting is burdensome for companies.

In the past, companies had 45 days to file their quarterly reports on the company's well being (10Qs), now they have 30 days. In order for companies to comply with these requirements, they need additional legal support as well as staff to handle the paperwork.

Larger corporations will be able to add these additional resources to their company with little effect to their bottom lines. However, some smaller companies may run into difficulties because they may lack both the financial and intellectual capital to comply with these stringent regulatory changes.

The one mistake that the SEC and the US government has made in putting together the Sarbanes-Oxley Act was not differentiating between large and small corporations. It appears that there has been no thought about the long-term effects these stringent requirements may have on smaller companies.

As a result, we could see smaller companies being forced out of business because they cannot comply with the new regulations. This in turn will trickle down to cause many entrepreneurs to stay away from the corporate world, which could ultimately result in monopolies controlling certain sectors of the global economy.

Also, has anyone thought about how the accuracy of reports will be affected if the time in which to report on the company's well being and any changes in the company has been reduced? Why the expediency when what the regulators should be looking for is accuracy? The Bermuda public companies are all subject to the same disclosure requirements as companies anywhere in the world.

Most important, Bermuda companies are willing and able to comply with these requirements. Some say what Kozlowski (former head of Tyco) did could not have been done in most of the publicly traded companies here because for transactions as large as the ones he has been accused of making, two senior executives of the company would need to sign off on the transactions before the funds could have been released.

On the positive side, what Enron, Tyco and others have done has caused companies to implement tighter internal financial controls.

Auditors and audit/compensation committees now want to know exactly where money is going within a company. Compensation committees are very careful to make sure the money is going where they say it is going. They do not want any surprises at the end of the day as has been discovered in the Tyco debacle.

So are the Bermuda companies complying with the rules and regulations of the Sarbanes-Oxley Act?

It appears that the big public companies are managing themselves to US standards in terms of corporate governance and disclosure.

They are also largely successful and at least as successful as their US counterparts in fulfilling their reporting obligations. So for those who look down on Bermuda as a lax regulatory jurisdiction, our publicly traded companies not only have to comply with the regulatory requirements of Bermuda, they also have to comply with those in the US.

And they are doing both well. Our solvency record speaks for itself.

Cathy Duffy is a Chartered Property Casualty Underwriter (CPCU) and is now a freelance writer. She is a former executive of Zurich Global Energy and has 15 years experience in the insurance industry. She writes on insurance issues in The Royal Gazette every Monday. Feedback crduffycwbda.bm