Smaller U.S. public companies got an additional one-year reprieve Wednesday from a key part of the anti-fraud law enacted after the series of corporate scandals in 2001-2002.
The Securities and Exchange Commission voted 5-0 at a public meeting to give smaller companies a second extra year — until July 2007 — to meet the requirement to file reports on the strength of their internal financial controls under the Sarbanes-Oxley Act of 2002. A number of companies, especially smaller ones, have complained about the burden of complying.
In another move aimed at easing requirements, the SEC commissioners proposed rolling back a mandated program phasing in shorter deadlines for companies of all sizes for filing quarterly and annual financial reports.
It was the SEC’s first public meeting presided over by Chairman Christopher Cox, whom President Bush chose in June to lead the agency after the surprise resignation of then-chairman William Donaldson. Cox, a free-market conservative and former securities lawyer who was in Congress for 16 years as a California Republican, left the House to assume the SEC job last month.
He has walked a delicate line, stressing the importance of protecting investors while remaining neutral on controversial regulatory issues. Cox has said he would not allow enforcement by the SEC to slacken.
Wednesday’s move by the regulators giving smaller companies an additional reprieve “in no way reflects any desire to back away” from the requirements of the Sarbanes-Oxley law, Cox said before the vote.
The SEC already in March gave smaller companies, defined as having a market value of up to $75 million, a one-year delay in complying with the internal controls rule.
Smaller companies have complained about the impact of the law enacted at the height of the scandals that ensnared Enron Corp., WorldCom Inc. and other big corporations, saying it is too costly and difficult to comply.
Last December, the SEC set up an advisory committee to help it understand how smaller public companies are being affected by the anti-fraud law and securities laws. The panel recently recommended an additional year’s delay for the internal controls rule.
The SEC also has considered possible revisions to the anti-fraud law itself.
In May, the SEC issued guidelines that allow flexibility for companies of all sizes in implementing key provisions of the law.
Wednesday’s meeting also was the first SEC public meeting in which Commissioner Annette Nazareth participated. Nazareth, who was the director of market regulation at the agency, also was recently named by Bush — in this case to fill one of two Democratic slots on the five-member commission.