New legislation recently introduced in the US Senate aims to ensure that Sarbanes-Oxley
Act regulations due to take effect in June do not disproportionately impact the nation’s
small businesses.
The Small Business Regulatory Review Act of 2007 would require the Securities
and Exchange Commission (SEC) and Public Company Accounting Oversight Board
(PCAOB) to take into account the burdens of small businesses before issuing final Sarbanes-Oxley
rules.
Provisions in the Small Business Regulatory Review Act of 2007 would require:
the SEC to conduct a small business analysis before the SEC and PCAOB publish
final rules on small business internal control compliance; the SEC to publish
a small business compliance guide explaining the SEC’s final rules in
non-technical language; and the Government Accountability Office to assess the
impact of the SEC’s final rules on small public companies two years after
they are published.
“The Small Business Regulatory Review Act of 2007 will help to ensure
that small stock companies do not suffer from additional unintended consequences
that harm their ability to compete, innovate, grow, and, most importantly, create
jobs,” stated Olympia J. Snowe (R-ME), Senate Small Business and Entrepreneurship
Committee Ranking Member, who introduced the bill. “Our nation’s
small stock companies are the cornerstone of our entrepreneurial economy, and
it is essential that we carefully address the regulatory barriers that impede
their growth.”
“Despite their best efforts, it is clear that the SEC and PCAOB have
struggled to achieve the difficult balance of protecting investors while not
burdening businesses with crushing compliance costs,” added Sen. Norm Coleman
(R-MN) a co-sponsor of the bill. “I recognize the difficulty in achieving
this balance and commend efforts to reach out to the small business community
and develop new rules to reduce the compliance burden. In order to ensure that
the SEC is moving in the right direction, I am cosponsoring Ranking Member Snowe’s
measured, common-sense legislation which will require the SEC to undertake the
necessary impact review of its proposed new rule on small businesses."
"Ultimately, this burden is not just about the bottom-line, but American
jobs and competitiveness. Our future economic prosperity and competitiveness
depend on the ability of our small businesses to innovate and grow into industry
leaders," Coleman continued. "At the end of the day, I hope that the regulators
can map out a way for small businesses to report trusted and verifiable numbers,
but in a way that enables them to do what they do best – grow jobs and
the economy.”
The Senators said that small stock companies are struggling with the cost of
Sarbanes-Oxley compliance, regardless of their industry. A Government Accountability
Office study, which Snowe jointly requested with Sen. Mike Enzi (R - WY), found
that the costs of complying with the Sarbanes-Oxley Act were nine times greater
for smaller stock companies than for large stock companies, significantly reducing
small companies’ ability to compete.
On April 18, 2007, the Senate Committee on Small Business and Entrepreneurship
held a hearing to address the SEC and PCAOB's proposed regulations. While acknowledging that Sarbanes-Oxley played a critical role in restoring
investor confidence, Snowe called on the SEC and PCAOB to ensure that final
regulations, due out in June 2007, do not place an undue burden on the nation’s
small businesses.
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