SEC Won’t Exempt Smaller Firms From Anti-Fraud Law Requirement

The Securities and Exchange Commission said Wednesday that it had decided not to exempt smaller public companies from a key requirement of a 2002 anti-fraud law, resisting entreaties from business interests that have been complaining about the costs of compliance.

In a statement, the SEC said it would take a series of actions meant to improve the way the law works, “although ultimately all public companies will be required to comply.”

At issue is a key part of the Sarbanes-Oxley law that arose from the 2002 corporate scandals: the requirement for companies to file reports on the strength of their internal financial controls and fix any problems. An advisory committee appointed by the SEC formally proposed last month that the agency exempt smaller companies from the requirement -- a move that would affect about 70% of all U.S. public companies.

The planned actions announced by the SEC, including providing guidance to companies on complying with the law, “are designed to further improve the reliability of financial statements and to better protect investors” while making the regulatory process more efficient and cost-effective, SEC Chairman Christopher Cox said in a statement. “As we go forward, we will consider the special concerns of all companies that fall under our jurisdiction -- large and small, foreign and domestic.”

The Public Company Accounting Oversight Board, which supervises the accounting industry, issued a similar statement.