Bipartisan COMPETE Act is an Overdue Reform of Sarbanes-Oxley, Says Epstein Becker Green Wickliff & Hall Attorney.

DALLAS -- A bipartisan bill in Congress that would ease Sarbanes-Oxley reporting demands on small businesses is a welcome move, according to William H. Venema, a corporate attorney at Epstein Becker Green Wickliff & Hall, P.C.

The odds of the bill passing are good, since this is the bill's third incarnation in Congress in three years.

"The cost of complying with Sarbanes-Oxley has caused many companies to abandon plans to go public or to list on overseas exchanges, both of which are dangerous trends," said Venema. "When Congress feels the political heat of an issue, it often responds in a way that can best be described as an overreaction. When the heat cools down, it is often a good idea to take a second look at the laws that were passed. The new bill is a realization that SOX went too far and stifled small business under reporting requirements."

Congressman Pete Sessions (R-TX), Congressman Gregory Meeks (D-NY), Congressman Tom Feeney (R-FL), and Senator Jim DeMint (R-SC) have joined to reintroduce the Competitive and Open Markets that Protect and Enhance the Treatment of Entrepreneurs (COMPETE) Act, an act that seeks to lift overly burdensome corporate auditing requirements of SOX that were enacted in 2002 in the wake of the Enron and WorldCom scandals.

The bill, introduced on March 13, was co-sponsored by 26 representatives. It was referred to the House Financial Services Committee.

Reports indicated that the number of companies cutting their common shares from U.S. stock exchanges nearly tripled in 2003, the year after Sarbanes-Oxley came into effect.

The COMPETE Act seeks to reform Section 404 of the Sarbanes-Oxley Act, which requires internal and external audits of corporate financial accounting controls.

"For many businesses, the expenses of complying with SOX have been overwhelming," said Venema.

As a result, the COMPETE Act is designed to meet the following objectives:

-- Ensure that SEC definitions are clear and precise, thereby eliminating an incentive for auditors to be overzealous in prosecuting these regulations and relieving managers of fear in operating because of uncertainty.

-- Ensure that the SEC is focused on the internal controls that pose a material risk to a company's financial health.

-- Remain vigilant against regulations that stifle innovation, increase risk, and prevent America from being competitive.

The COMPETE Act also defines "smaller public companies" as having total market capitalization of less than $700,000,000, and eliminates their need for SOX compliance.

"Although Sarbanes-Oxley was well intentioned, sensible policies must be crafted to ensure that American companies continue to have access to the capital markets," said Venema. "Ironically, as more companies avoid the public markets there is less information available to the public, because private companies don't report to the SEC."

Founded in 1973, Epstein Becker & Green, P.C., is a law firm with more than 380 attorneys practicing in 11 offices throughout the U.S. -- Atlanta, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Newark, San Francisco, Stamford, and Washington, D.C. -- and affiliations worldwide. The firm's size, diversity, and global affiliations allow our attorneys to address the needs of both small entrepreneurial ventures and large multinational corporations on a worldwide basis. EBG focuses on Business Law, Health Care and Life Sciences, Labor and Employment, Litigation and Real Estate. www.ebglaw.com