Proposed Legislation Would Exempt SMBs from Sarbox 404(b)

Late last week I wrote about the House Financial Services Committee's voice vote passing an amendment that would require the Securities and Exchange Commission and the Government Accounting Office to conduct separate cost-benefit analyses before small public companies will be responsible for Sarbanes-Oxley 404(b) compliance. It comes on the heels of the SEC's announcement that no further compliance delays for those companies will be coming from the agency.

Tuesday, Huffington Post writer Shahien Nasiripour reported that an amendment offered by Rep. John Adler, D-N.J., which would exempt all public companies with a market capitalization of less than $75 million from 404(b) compliance, also passed a Financial Services Committee voice vote. What Nasiripour finds most interesting is that the White House appears to have been involved in pushing this legislation. He writes:

With the White House's blessing, a House panel voted Tuesday to water down a key post-Enron measure designed to protect investors.

Quoting The Wall Street Journal, he notes that Adler told committee members he'd spoken about the legislation repeatedly with White House Chief of Staff Rahm Emanuel.

Investor advocates are understandably concerned. Nasiripour quotes former SEC Chairman Arthur Levitt this way:

It's the freshman members of Congress, fearful for reelection, that are pandering to interests that want to overturn this legislation. It makes a mockery of what the Democratic Party has always stood for -- individual investors.

It will certainly be interesting to see which of these amendments survives the committee's roll call vote.