|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
SOX Rules Hit Small Firms Hard: Study
Christine Caulfield
Securities Law360. November 15, 2007
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EXCERPT: The Securities and Exchange Commission is being urged to delay implementation of tough new financial reporting rules under the Sarbanes-Oxley Act after a study revealed the regulations would impose heavy costs on small businesses. The U.S. House Small Business Committee has called on the federal regulator to put off the effective deadline of the new reporting rules until further analysis could be conducted on the impact to small ventures. Committee Chairwoman Nydua M. Velazquez said a study released Nov. 8 by a coalition of small-business groups, including the U.S. Chamber of Commerce, showed small firms would be unfairly burdened with the cost of ensuring compliance. The study, which was commissioned by the committee, showed 60% of the 177 small businesses surveyed had already hired an outside auditor to prepare their companies for compliance with new Sarbanes-Oxley rules, due to come into effect next year. The rules, under Section 404 of the act, require both company management and an external auditor to report to the SEC on the efficacy of internal financial reporting controls. The survey was commissioned in response to repeated failures by the SEC to produce “hard dollar estimates” of the effect of the rules on small businesses, Velazquez said. “I am disappointed that the SEC has chosen to ignore small firms, failing to perform even the most basic analysis to understand the consequences for entrepreneurs,” Velazquez said. “This data confirms what many in the small business community have suspected and feared — that small firms will incur heavy costs due to these onerous regulations. This is a burden that small firms cannot and should not be forced to bear,” she added. A representative for the SEC declined to comment on the study on Thursday but said Commission Chairman Christopher Cox had addressed the House Small Business Committee on its concerns in June. Cox said at the time that the commission had already delayed 404 compliance for small companies "because of the disproportionately higher costs they face compared to larger companies." The committee plans to hold a hearing later this year on the costs of implementing the rules by the current deadline. A scheduled Nov. 14 hearing was postponed, according to committee spokeswoman Erin Donar. |
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