Speaking at a Council on Foreign Relations forum in New York a day after the advisory panel's decision, f our former chairmen of the SEC all argued against exempting any companies from the internal controls provisions, according to reports.
William Donaldson (whose tenure ran from 2003 to 2005), Harvey Pitt (2001 to 2003), Arthur Levitt (1993 to 2001) and Richard Breeden (1989 to 1993) all made cases against easing the rules.
Donaldson said that adjustments can be made to the law in how it applies to smaller companies; Pitt referred to SOX's standards as vital and said that the law could have calmed the fall-out of the dot-com era; Levitt noted investors who lose money because of bad internal controls would feel wronged whether the companies were small or large; and, Breeden in noting the potential for the high costs of compliance, said that it would be money well spent.
Donaldson is now chief executive of Donaldson Enterprises Inc., Pitt is chief executive of Kalorama Partners LLC, Levitt is a senior adviser to private equity firm Carlyle Group, and Breeden chairs Richard C. Breeden & Co. Levitt already lent his name earlier this month to a letter speaking against changes to SOX.
As expected, a Securities and Exchange Commission advisory panel gave preliminary backing to easing the internal controls provisions of Sarbanes-Oxley for small public companies this week.
The SEC's Advisory Committee on Smaller Public Companies voted to seek public comment on a proposal to eliminate the requirements for companies with market values less than $125 million , as well as to ease the regulations for slightly larger ones.
Smaller companies have complained that the rules under SOX Section 404 are disproportionately costly and burdensome for them. The proposed changes would free an estimated 80 percent of public companies from at least part of the rules.
The public will have 30 days to comment once the recommendations are published in the Federal Register. After reviewing the suggestions, the panel is scheduled to present its final recommendations in April to the five SEC commissioners.
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