Tuesday, May 10, 2011

SEC Study Recommends Not Expanding Sarbanes-Oxley
404(b) Exemption to Medium Size Companies

The Security and Exchange Commission (SEC) just published a study which concludes that the controversial Section 404(b) of the Sarbanes-Oxley Act should continue to be required for companies with a market capitalization between $75 million and $250 million.

The study is the result of a Dodd-Frank act mandate that the SEC consider exempting certain types of companies from Section 404(b) of the Sarbanes-Oxley Act
"The staff did not find any specific evidence that such potential savings [from eliminating the auditor attestation provisions of Section 404(b)] would justify the loss of investor protections and benefits to issuers." - Report by ACO of the SEC
On the issue of the 404(b) requirement's influence on companies going public on US markets, the report admits that "the research regarding the reasons for listing decisions is inconclusive" but goes on to say that "the evidence does not suggest that granting an exemption ... would, by itself, encourage companies in the United States or abroad to list their IPOs in the United States."
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Sources:
(a) Study and Recommendations on Section 404(b) of the Sarbanes-Oxley Act of 2002 For Issuers With Public Float Between $75 and $250 Million - Staff of the Office of the Chief Accountant of the U.S. Securities and Exchange Commission, April, 2011

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