The U.S. Securities and Exchange Commission voted 5-0 Wednesday to give publicly traded companies valued at less than $75 million an extra year to comply with the Sarbanes-Oxley Act, pushing the deadline to July 15, 2007.
The commission will also solicit public comment on several compliance issues, including the time and money smaller companies have spent to date to comply with the internal control requirements of Section 404 of Sarbanes-Oxley.
That request for public comment will remain open for 30 days after publication in the Federal Register, the official daily publication of rules, proposed rules and notices of Federal agencies, said SEC spokesman John Heine. Contact information for those who wish to provide public comment will be included in the request, he said.
"The purpose of continuing the grace period for another 12 months would be to consider the information that would be provided from the advisory committee on smaller public companies and from other sources to the commission," said SEC Chairman Christopher Cox, at Wednesday's meeting.
The commission also voted 5-0 on a second proposal to further consider creating a new category for public companies with market capitalizations of $700 million or more, called "large accelerated filers." The proposal would require those companies to file their annual and quarterly reports earlier, while maintaining the current filing deadlines for smaller companies. That proposal will move on to a 30-day public comment period, beginning upon publication in the Federal Register, before a vote by the commission at a later date.
The proposals were made by the SEC staff from its Division of Corporation and Finance, based on recommendations by the SEC's Advisory Committee on Smaller Public Companies, a group of 21 executives from publicly traded SMBs and auditing companies.
The Sarbanes-Oxley Act of 2002, or SOX, requires public companies to document their financial controls and prove they are reliable and accurate. It is aimed at preventing corporate fraud. However, many companies have complained the costs of compliance are too high and that requirements for compliance are too vague.
The Financial Executives International (FEI), an association of 15,000 financial officers based in Florham Park, N.J., is among those who have lobbied the SEC to relax some SOX regulations, arguing that smaller public companies are disproportionately affected by SOX. The FEI has calculated that it costs a company with revenue of $25 million to $99 million more than $800,000 to comply with SOX. The FEI has also calculated that these companies on average spend 1.29% of their sales revenue on SOX compliance, while companies with between $5 billion to $24.9 billion annual sales revenue spend 0.06% of their average sales revenue on compliance.