The House of Representatives recently approved sweeping financial legislation that would exempt small businesses from having to comply with a controversial portion of the Sarbanes-Oxley Act (SOX), in addition to addressing a strikingly broad array of financial regulatory issues.
H.R. 4173, dubbed the Wall Street Reform and Consumer Protection Act of 2009, passed strictly along party lines by 223-202, with no republicans voting for the bill and 27 democrats voting against. The bill's most controversial provisions create a new agency, the Consumer Financial Protection Agency (CFPA), that will regulate consumer bank transactions. The legislation also increases oversight on the nation's largest banks, including imposing stricter capital requirements, and authorizes the government to dismantle firms that present a larger systemic risk to the nation's economy, combating the existence of firms that are "too big to fail."
Tucked in the legislation was language that exempts small businesses from compliance with SOX Section 404. The amendment faced a late challenge by prominent democrats, but was ultimately included in the final version of the approved legislation.
Earlier this year, the U.S. Securities and Exchange Commission (SEC) said that firms with a market capitalization below $75 million would have to comply with Section 404's auditor attestation requirement starting in June 2010. Specifically, SOX 404 requires an independent third party audit of a company's internal controls over financial reporting and already applies to firms larger than $75 million.
The amendment was originally introduced by New Jersey representatives Scott Garrett (R) and John Adler (D). Other provisions address oversight in the nation's derivatives market and increase transparency in the credit rating industry.
The bill now heads to the Senate where action isn't expected until after the New Year.
Jacob Barron, NACM staff writer