Possible Sarbanes-Oxley relief for small business
When you think of Sarbanes-Oxley, you probably think of Enron or WorldCom. It's only natural.
The regulations were meant to clean up financial abuse at public companies. But they affect private firms as well. Many fast-growing private companies have been forced to follow the costly and time-consuming regulations to make their businesses more attractive for an initial public offering or possible buyout.
But a measure of relief may be on the way. The Securities and Exchange Commission's Advisory Committee on Smaller Public Companies, in a report to SEC Chairman Christopher Cox, is recommending that smaller public firms—those with market capitalizations under $800 million or so—be partially exempt from Section 404 of the Sarbanes-Oxley Act.
That's the part requiring costly internal financial control and audit systems—and often the hiring of a compliance officer. Microcap firms—those with market caps under $128 million—could receive a complete exemption. If Cox and Congress agree, small business with an eye on a potential IPO would be under less pressure to become Sarbanes-Oxley compliant.