Senate crushes bid for Congressional reform of Sox

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The amendment, which was defeated 62 votes to 35, was submitted for Senate approval as an adjunct to the America COMPETES Act, a bill focused principally on improving science, engineering and maths education and on supplementing research funding. The proposals would have given businesses with a total market value of less than $700 million, revenue of less than $125 million, or fewer than 1,500 shareholders, the option to choose to comply with Section 404 of Sox or not to.

In response to the amendment, which was submitted by Republican senator James DeMint, Sox backers voted 97-0 in favour of issuing a statement of support for ongoing work by the Securities Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) to reform Sox at regulator level.

“The Senate rejected an approach that would weaken investor protections and make it more likely for investors to be harmed by the malfeasance that caused the collapse of Enron and WorldCom,” said current and former Senate Banking Committee heads Christopher Dodd and Richard Shelby in a joint statement. “By these two votes, the Senate today made a strong statement…to support protecting investors.”

The statement also noted that if DeMint’s exemption were passed, 70% of US businesses would fall below the $700 million market valuation figure and therefore be eligible to opt out of Section 404.

Despite the defeat of the amendment, DeMint was adamant that Congressional involvement was sorely needed to protect the interests of small business. “We can’t pretend to make America more competitive while ignoring burdensome regulations that are devastating small businesses. Sox is crippling American business, and we’re quickly losing our ability to compete in the global economy,” he said in a statement.

“Congress created this problem and it’s our responsibility to correct it. The SEC should do their part but the buck stops here in Congress, and we shouldn’t pass blame onto regulators. This was our best chance at real reform, but many senators have turned their backs on American small businesses,” DeMint concluded.

The SEC is currently working alongside the PCAOB on SOX guidance for small businesses. The information is due out within the next two months, in time for 2007 financial statements.