News from U.S. Senator Olympia J. Snowe
Chair, Senate Committee on Small Business and Entrepreneurship
For Immediate Release: March 9, 2006
Contact: Chris Chichester, 202-228-5843
SNOWE: SMALL BUSINESSES COULD FACE EXPENSIVE, PARALYZING REGULATORY LIMBO UNDER SARBANES-OXLEY LAW
(Washington, DC) – In a letter to Securities and Exchange Commission Chairman Christopher Cox, U.S. Senator Olympia J. Snowe (R-Maine), Chair of the Senate Committee on Small Business and Entrepreneurship, continued her aggressive effort to ensure that the Sarbanes-Oxley Act of 2002 does not create unintended burdens on small businesses that will hurt job creation, competitiveness, access to capital, and their ability to continue as publicly traded companies.
Last year Senator Snowe and Senator Michael Enzi asked the Government Accountability Office to study the Act’s effects on small businesses, and to determine if the Act places a disproportionate compliance burden on small businesses. This important study will be completed shortly.
Excerpts from Senator Snowe’s letter follow:
“Existing regulations treat both small and large companies, regardless of their vast differences in size and power, as if they pose the same level of risk to the market, and should bear the same regulatory burden . . .
“Currently, many small public companies are caught in an expensive and paralyzing state of regulatory limbo. Business owners are unsure if they will be required to meet the Act’s existing regulations, set to take effect next year, or comply with new requirements specifically designed for small businesses. The Advisory Committee’s deliberations over Section 404 of the Act, and the SEC’s postponement of these internal controls requirements for small non-accelerated filers until 2007, have left many small businesses uncertain about next year’s compliance requirements. Prior to the postponement of Section 404's requirements, some small firms invested considerable amounts of time and money into internal controls compliance . . .
“While I believe in ‘right sizing’ regulations, I caution the SEC against creating a new, unduly complex regulatory system that attempts to solve the problems of the current, overly ambiguous and difficult regulatory system. Instead, I urge the SEC to adopt clear, unambiguous, and practical small business rules . . .
“Before Section 404 was postponed, one small Maine public company stated that it spent roughly $630,000 on internal controls compliance costs. The SEC’s original cost estimate for Section 404, compliance, however, predicted that companies would only spend 398 hours and approximately $35,286 each to comply with the Act, stating ‘We believe, however, that the annual average burden for small issuers is much lower.’ A significant difference between the SEC’s estimate and the costs actually incurred by small companies would call into question the SEC’s ability to accurately evaluate and estimate the cost of new regulations on small businesses. Grossly under-estimating the regulatory impact of new rules will smother and suffocate small ground-breaking businesses, drive them out of the market, and greatly impede U.S. competitiveness and innovation . . .
“At my request, the Government Accountability Office is finishing the first comprehensive government study into the effects of the Act on small businesses. I hope the SEC will carefully consider the GAO’s findings, along with the Advisory Committee’s report and the comments of concerned businesses, organizations, and investors, in your final small business regulatory ruling.”
The letter is attached.
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