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Wall Street Journal: Bill Seeks to Ease Sarbanes-Oxley for Small Firms

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By Angus Loten

In a bid to lower barriers to capital for fast-growth companies, House legislation unveiled last week would allow small businesses to opt out of costly internal-control measures under the Sarbanes-Oxley Act for up to 10 years after going public.

The Startup Expansion Investment Act, introduced by Rep. Ben Quayle (R., Ariz.), would temporarily exempt companies with market valuations below $1 billion from section 404 of the act. The current market-cap threshold to be exempt is $75 million.

Small firms have long complained about onerous compliance costs under the act, known as SOX, which was put in place nearly a decade ago after widespread accounting scandals erupted at Enron, WorldCom and other large, publicly-traded companies. Among other measures, section 404 requires all public companies to seek an outside audit of internal controls, adding as much as $1 million in costs for small companies, according to a recent survey by Protiviti, a global risk and business consulting firm.

Since its inception, delays and temporary reprieves have largely shielded these firms from the act's tougher measures. Quayle's bill would create a permanent 10-year window.

"Access to the public capital markets is vital for a company to expand and hire new workers," Quayle said in a statement.

Similar measures were recently proposed in the Startup Act of 2011, unveiled in July by the Ewing Marion Kauffman Foundation, a Kansas City, Mo., research group.

Robert Litan, the group's vice president of research, said in a statement that Quayle's bill was "an important step as we try to increase the number of companies that go public" and create jobs.

Supporters of Sarbanes-Oxley say the law is necessary to protect shareholders from lax corporate accounting and fraud.


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