The House Financial Services Committee approved an amendment that would permanently exempt small public companies with a public float below $75 million from complying with Section 404(b) of Sarbanes-Oxley.
The amendment, sponsored by Rep. Scott Garrett, R-NJ and Rep. Rep. John Adler, D-NJ, was added to the Investor Protection Act (IPA), which passed the committee in a 41-28 vote.
Under SOX Section 404, public companies and their independent auditors are each required to report to the public on the effectiveness of a company’s internal controls. The smallest public companies with a public float below $75 million have received several extensions to design, implement and document these internal controls before their auditors are required to attest to the effectiveness of these controls.
The amendment would provide a permanent exemption for the small companies from complying with SOX Section 404(b). The amendment also asks the SEC and GAO to conduct a study to determine how the SEC can reduce the burden of complying with Section 404(b) while maintaining investor protections for companies with market capitalization between $75 and $250 million.
SEC Chair Mary Schapiro stressed that the SEC will provide no further extensions and “it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance.”
This deadline extension expires beginning with the annual reports of companies with fiscal years ending on or after June 15, 2010.