Garrett Statement on Committee Passage of SOX Amendment
Washington,
Nov 4 -
Rep. Scott Garrett’s (R-NJ) Sarbanes-Oxley amendment to the Investor Protection Act of 2009, cosponsored by Rep. John Adler (D-NJ), was approved by the Financial Services Committee today by a roll call vote of 37-32.
This amendment would exempt small businesses from the burdensome reporting requirements contained within Section 404(b) of the Sarbanes-Oxley (SOX) Act of 2002 .
The amendment language mirrors legislation Garrett introduced earlier this year, the “Small Business SOX Compliance Relief Act.”
“Although the stated intent of Sarbanes-Oxley was to provide investor confidence in our markets through greater accountability and disclosure, the Act has had the unintended effect of creating undue—and often unbearable—burdens on small businesses,” Garrett said. “There is a place for Federal oversight, but the weighty cost of compliance under Section 404 is slowly strangling small businesses. It is diverting valuable resources away from other legitimate business needs; creating massive and tedious documentation requirements; and discouraging the public listing of both international and domestic companies on U.S. markets. Honest companies are being punished and the U.S. economy will suffer as a result. Especially now, as our country struggles to emerge from a recession, the last thing American small businesses need is another barrier to economic stabilization. I would like to thank my colleague from New Jersey for working with me on this bipartisan amendment that will free small businesses from onerous regulations and allow them to return their focus and their resources to creating jobs for unemployed Americans and innovating for our economy.”
The Securities and Exchange Commission (SEC) has repeatedly extended the deadline for non-accelerated filers to begin providing audited assessments of their internal controls over financial reporting, an acknowledgement of continued concern about compliance costs. Although reforms were made in 2007 to relax the guidelines for smaller companies, businesses of all sizes still report excessive compliance costs, as noted in an SEC report from September 2009 . In summarizing survey responses from businesses regarding the benefits of Section 404 compliance, the SEC wrote, “[A] majority felt that the costs of compliance outweighed the benefits. This was especially true among smaller companies.”
The extra requirements of Section 404 increase costs to small companies significantly. Section 404 adds external consulting costs, including legal fees, and substantially increases the audit and attestation fees for these companies. Research by NASDAQ shows that the burden of compliance, on a percentage of revenue basis, is 11 times greater for small companies . This creates an unfair competitive advantage for larger companies.
