Small businesses win reprieve from new rules
WASHINGTON — Securities regulators have given smaller U.S. corporations and foreign companies a one-year reprieve from a key part of the anti-fraud law enacted after the series of corporate scandals.
The Securities and Exchange Commission said Wednesday that it will give those companies, some of whom had complained about the burden of complying, an extra year, until July 15, 2006, to meet with the requirement to file reports on the strength of their internal financial controls under the Sarbanes-Oxley Act of 2002.
“The extension of time “strikes the right balance,” Alan Beller, director of the SEC’s corporation finance division, said in a statement. “Companies should use the extension not to delay but to improve the quality of their efforts.”
Smaller and foreign companies have complained about the impact of the law enacted at the height of the scandals that ensnared Enron Corp., WorldCom Inc. and other big companies, saying it is too costly and difficult to comply.
In mid-December, the SEC set up an advisory committee to help it understand how smaller U.S. public companies are being affected by the anti-fraud law and securities laws.
SEC Chairman William Donaldson said in an interview last month that the agency was looking at possible revisions to the anti-fraud law itself because it has proved too painful and costly for some companies to comply.
Recent accounting scandals have tainted several major European companies, including Royal Dutch/Shell Group, Italian dairy giant Parmalat Finanziaria SpA and French media conglomerate Vivendi Universal. Most recently, Irish drug maker Elan Corp. agreed to pay $15 million to settle SEC charges that it misled investors about revenue from a joint venture.
Lynn Turner, a former chief accountant at the SEC, questioned the wisdom of the delay, saying Thursday that “investors should be concerned companies are still asking for more time to comply with” the requirements.
He also expressed concerns about how effective the certification would be, noting that there is still no guarantee there won’t be financial misstatements.