News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
November 8, 2007     

CONTACT: Erin Donar,  (202) 225-4038

Survey Confirms That SOX 404 Implementation Will Disproportionally Burden Small Firms
House Small Business Committee will hold hearing next week to determine next steps

WASHINGTON – For the first time, meaningful data is now available demonstrating that Sarbanes-Oxley section 404 will impose heavy costs on small firms. House Small Business Committee Chairwoman Nydia M. Velázquez called for the survey to be performed after the Securities and Exchange Commission (SEC) repeatedly failed to provide a hard dollar estimate of the impacts on small businesses. In response to these new findings, the Committee will hold a hearing next Wednesday to receive testimony from non-accelerated filers who are already incurring fees in anticipation of SOX 404 implementation.

“I am disappointed that the SEC has chosen to ignore small firms, failing to perform even the most basic analysis to understand the consequences for entrepreneurs,” said Chairwoman Velázquez. “This data confirms what many in the small business community have suspected and feared - that small firms will incur heavy costs due to these onerous regulations. This is a burden that small firms cannot and should not be forced to bear.”

The survey showed that the cost of compliance would amount to more than 3 percent of net income for nearly half of non-accelerated filers. Additionally, with SOX 404(b) over a year away, nearly 60 percent of firms said they have already engaged an outside auditor to handle compliance. Small businesses operate on slim profit margins and have limited time and resources, and these additional costs take a substantial toll on their bottom line.

“Despite concerns about the effects on small firms, the SEC claims that that new regulations will not be overly burdensome,” Chairwoman Velázquez. “But this new data proves that small businesses are indeed being impacted, and I call on the SEC to delay implementation of SOX 404(b) until the needs of small ventures are taken into account.”

The survey was conducted by a coalition of small business groups, including the U.S. Chamber of Commerce.

###