The House Financial Services Committee voted to exempt small and midsized public companies from Sarbanes-Oxley audit requirements.
The exemption came in a 37-32 vote on the provision, which permanently exempts public companies with market capitalization of less than $75 million from the audit requirements. White House chief of staff Rahm Emanuel reportedly pressed lawmakers to carve out the exemption, even though SEC Chair Mary Schapiro had written a letter to the committee last month opposing the exemption. The audit requirements for smaller companies internal controls have been postponed several times by the SEC, but the SEC had announced recently that it would no longer delay the requirements.
The measure was part of an overall bill, the Investor Protection Act, which doubles the authorized funding for the Securities and Exchange Commission over five years and imposes stricter rules on broker-dealers and investment advisers. The overall bill passed by a vote of 41-28. It includes a provision to close a loophole that had prevented the Public Company Accounting Oversight Board from examining the auditors of more types of broker-dealers, including investment firms like Bernard Madoff's, which did not clear trades on its own.
The bill also mandates that every financial intermediary who provides advice will have a fiduciary duty toward their customers. Broker-dealers and investment advisers will have a harmonized standard of duty toward clients.
In order to maintain a sound economy, we must improve investor protection and confidence, said the bill's sponsor, Rep. Paul Kanjorski, D-Pa., chairman of the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, in a statement. The Investor Protection Act aims to achieve these goals while also improving enforcement powers at the U.S. Securities and Exchange Commission and implementing a fiduciary standard for broker-dealers and investment advisers to ensure that customers interests are at the forefront of investment recommendations. Our financial system has failed far too many investors for far too long and we must change course. I believe this bill has the capabilities to address many of the problems we continue to face.
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