Former Senator Paul Sarbanes, D-Md., who, as the head of the Senate Banking Committee, co-authored the sweeping Sarbanes-Oxley reform act said he supports developing additional guidance for smaller filers but, not surprisingly, dismisses exempting those companies from compliance with the legislation's rigid Section 404. "Stop and think about that for a moment," said Sarbanes in a speech before attendees at a conference on financial reporting and governance presented by Pace University's Lubin School of Business, here. "That would mean that you would be exempting 80 percent of public companies from compliance."

Sarbanes referred to recent pronouncements from the Securities and Exchange Commission and the Public Company Accounting Oversight Board regarding potential streamlining of the 404 internal controls provision, which small filers have complained is disproportionate to them in terms of cost and manpower.

As evidence that lawmakers are solidly behind the measure, Sarbanes pointed out that on Wednesday, the Senate soundly rejected a bill that would have made SOX compliance optional for several thousand companies under a certain market cap.

Smaller filers have already received four deferments regarding 404 compliance from the SEC. Responding to comments that SOX has made the U.S. less competitive, particularly in the public offering market, Sarbanes pointed out that of the five biggest IPOs completed outside the U.S. last year, three were Chinese companies and the other two were based in France. "You have to take in the whole picture," said Sarbanes.

The five-term senator said that when he assumed the chair of the Senate Banking Committee in 2001 he did not envision having to pass major corporate legislation on the scale of SOX.

"We were dedicated to investor protection, but after 9-11, our committee was consumed with money laundering. At that time, if your portfolio manager did not have Enron, he came under a lot of criticism. But then they restated earnings in October [2001] and again in November before declaring bankruptcy. It turned out they were the canary in the mineshaft."

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