Lawmakers Eye Regulatory Relief for Smaller Public Companies
A new bill targeted at start-ups would ease reporting rules for public companies with less than $1 billion in market capitalization.
Smaller public companies may catch a break on reporting requirements.
U.S. Senators Jim DeMint (R-South Carolina) and John Barrasso (R-Wyoming) have introduced the “Startup Expansion and Investment Act,” which would exempt companies with less than a $1 billion in market capitalization from the reporting rules set by the 2002 Sarbanes-Oxley Act.
“Our bill will chip away at the burdens faced by American businesses—particularly for new innovative companies who want to expand and create jobs,” Barrasso said in a statement. “For far too long, American free-enterprise has been squeezed and shackled by heavy-handed government regulations and mandates. In this troubled economy, government needs to move aside and let the job creators do what they do best—invent, invest, and grow.”
The Ewing Marion Kauffman Foundation, which studies and advises on policies affecting American entrepreneurship, supports the legislation, concluding it would allow greater access to market capital. Critics accuse Sarbanes-Oxley—enacted after the Enron and other corporate scandals and intended to prevent future regulatory fraud—of hampering the expansion and innovation of fast-growing companies by making it difficult for small businesses to go public.
A 2006 report from the Government Accountability Office found that Sarbanes-Oxley requirements were disproportionately more costly for smaller companies: Public companies with $75 million or less in market capitalization paid $1.14 in audit fees for every $100 in revenue, while companies with more than a $1 billion in market capitalization paid just 13 cents. Sarbanes-Oxley forced a number of small public companies to revert to private ownership, according to a RAND Corporation study also from 2006.
The Startup Expansion and Investment Act is currently being considered by the Congressional Committee on Banking, Housing, and Urban Affairs.
