Growth Strategies

SEC Weighs More Time for More Companies

Committee would give an additional year for small businesses to comply with Section 404 of Sarbanes-Oxley; it also recommends widening the definiti...
Stephen TaubAugust 15, 2005

The Securities and Exchange Commission is considering additional relief for small companies in complying with the Sarbanes-Oxley Act.

Last week, the SEC’s Advisory Committee on Smaller Public Companies recommended that small companies be given an additional year to meet the requirements of Sarbanes-Oxley Section 404, which requires companies to document their internal controls, according to Reuters.

The committee also reportedly suggested that the definition of “small company” be widened to benefit a larger number of businesses. Last year, the commission gave a break to “non-accelerated filers” — defined by the SEC as companies with a market capitalization under $75 million — by extended for one year their deadline for complying with Section 404. Those companies must now begin to file internal-control reports beginning with their first fiscal year ending on or after July 15, 2006.

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“The committee is afraid that small public companies will waste money trying to comply with things that even the accounting firms don’t yet understand,” Gerald Laporte, the chief of the SEC’s Office of Small Business Policy, told Reuters.

The panel also recommended that a small company be defined as any company in the bottom 6 percent of total market capitalization, the wire service added. If implemented, this recommendation would immediately raise the market-cap cutoff to $767 million, based on data from this past spring, Laporte reportedly added.

Indeed, he told the wire service the panel plans to use its proposed definition of a small business in all future recommendations.