Small companies granted Sarbanes-Oxley reprieve.

THE U.S. SECURITIES and Exchange Commission (SEC) has once again postponed the compliance requirement for the smallest public companies to comply with the Sarbanes-Oxley Act of 2002. Unless there is an additional deferral, small firms will now be expected to comply with the law beginning with fiscal years ending after Dec. 15, 2009.

The postponement comes soon after the SEC adopted new rules designed to make it easier for small companies to raise capital and expanded the number of companies that can use the commission's scaled-back disclosure and reporting requirements for small firms. Now, an additional 1,500 public companies with less than US $75 million in public float will be eligible to use the SEC's simplified requirements. Moreover, the delay will enable the commission to consider the results of a study of cost and benefits of Section 404 compliance under the Public Company Accounting Oversight Board's Auditing Standard No. 5 and the SEC management guidance issued last year, which are due in June.

Appearing before the U.S. House of Representatives Committee on Small Business, SEC Chairman Christopher Cox testified that the commission decided to proceed cautiously in deference to small public companies and their investors because the cost of regulation falls heaviest on those firms. Small companies spend far more per employee than larger firms to comply with SEC and other federal regulations, according to a report prepared by U.S. Representative Nydia Velazquez (D-N.Y.), chair of the House Committee on Small Business. Her report shows that small businesses could spend up to 3 percent of their net income complying with Sarbanes-Oxley.