Legislation exempting smaller public companies from Sarbanes-Oxley 404 compliance requirements passed the House Financial Services Committee roll-call vote on Wednesday, according to The Wall Street Journal. Proposed by Reps Scott Garrett, R.-N.J., and John Adler, D-N.J., the exemption passed by what writer Fawn Johnson calls a "nail-biter" margin of five votes (37-32).

The provision would exempt public companies with market capitalizations of less than $75 million from the requirements of Sarbanes-Oxley section 404 -- requirements that small businesses have been bemoaning for years.

The overall bill to which the exemption has been attached would do several things to protect investors: establish a "harmonized" fiduciary standard for brokers and advisers, allow the Securities and Exchange Commission to pay informants in enforcement actions, and enable regulations that would prohibit the use of mandatory arbitration agreements between brokers and investors.

But as much as these things will protect investors if they pass, the Sarbox exemption for SMBs could harm investors, according to experts like former SEC Chairman Arthur Levitt, who told The Huffington Post this week:

This has enormous significance to individual investors. ...[T]he Democrats...are emasculating the best piece of legislation of the past 20 years.