Bill to Make SOX 404 Optional for "Smaller" Companies

By Cydney Posner

The anti-regulation brigade in the House continues to roll. Here's a bill that was just introduced in the House by Rep. Benjamin Quayle (R-AZ) (yes, the spawn of former VP Dan Quayle) that would make the internal control reporting and assessment requirements of SOX 404 optional for certain "smaller" companies. HR 2941, the "Startup Expansion and Investment Act,"  would add to SOX 404 an exemption allowing an issuer to elect not to provide the management's assessment described in subsection (a)(2) and the auditor's attestation on internal control described in subsection (b) if the issuer has a total market capitalization for the relevant reporting period of less than $1B and is either not subject to the Exchange Act annual reporting requirement under section 13(a) or 15(d), or has been subject to that requirement for fewer than 10 years. Apparently, issuers would still have to state the responsibility of management for establishing and maintaining adequate internal control structures and procedures for financial reporting. Issuers would be required to disclose their decisions to use the exemption in their next reports filed with the SEC. This bill was also referred to the House Committee on Financial Services.

This content is provided for general informational purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Cooley LLP, Cooley (UK) LLP, or any other affiliated practice or entity (collectively referred to as “Cooley”). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct or up to date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Do not send any confidential information to Cooley, as we do not have any duty to keep any information you provide to us confidential. This content may be considered Attorney Advertising and is subject to our legal notices.