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Press Release: SEC Offers Further Relief From Section 404 Compliance for Smaller Public Companies and Many Foreign Private Issuers

Press Release: SEC Offers Further Relief From Section 404 Compliance for Smaller Public Companies and Many Foreign Private Issuers

by Rick Turoczy on August 9, 2006

The Securities and Exchange Commission today issued two releases to grant smaller public companies and many foreign private issuers further relief from compliance with Section 404 of the Sarbanes-Oxley Act of 2002. The relief is in furtherance of the “next steps for Sarbanes-Oxley implementation” (SEC Press Release 2006-75) announced on May 17, 2006, and includes some new initiatives not previously announced.

Today’s releases follow the July 11, 2006, publication of a Concept Release soliciting public comment on guidance for management the SEC plans to issue to assist companies in assessing their internal controls over financial reporting.

“The actions taken in these releases continue the Commission’s efforts to be sensitive and responsive to the particular needs of smaller public companies and foreign private issuers, and to minimize the burdens that Section 404 may impose on them,” said SEC Chairman Christopher Cox. “By offering further relief for smaller companies and most foreign issuers, today’s actions will allow time for the Commission and the PCAOB to redesign Section 404 implementation in a way that is efficient and cost effective for investors.”

“We have heard that the Section 404 reporting requirements impose a special burden on foreign private issuers, smaller companies and newly public companies. These companies play an important role in our capital markets, and these releases illustrate the Commission’s commitment to improving the efficiency and effectiveness of Section 404 implementation for them,” said John W. White, Director of the Division of Corporation Finance. “We believe our proposed transition relief for newly public companies should enhance the attractiveness and cost-effectiveness of participating in our markets both for companies contemplating IPO’s and for foreign companies considering listing in the U.S. for the first time, without sacrificing important investor protections, and we look forward to receiving comment from a diversity of interested parties on that proposal.”

The Commission will continue to work on its own, and with the Public Company Accounting Oversight Board, to take several additional steps previously outlined on May 17, 2006, in SEC Press Release 2006-75 to improve the implementation of Section 404 so that it will work efficiently and effectively for companies and auditors of all sizes.

Press Release: SEC Offers Further Relief From Section 404 Compliance for Smaller Public Companies and Many Foreign Private Issuers

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