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SEC rejects Sarbanes-Oxley rules exemption for small companies

[JURIST] The US Securities and Exchange Commission [official website] has said that all public companies, regardless of their size, must eventually comply with rules [press release] implementing the Sarbanes-Oxley Act of 2002 [text, PDF], which is designed to protect investors. The decision Wednesday follows months of requests by small and mid-size businesses for an exemption from the rules, which could be prohibitively expensive, and two extensions [JURIST report] granted by the SEC for compliance by smaller companies. SEC Chairman Christopher Cox [official profile] said that smaller companies will be granted an extension of a few months once the final rules are released and that the agency will provide detailed guidance for compliance to smaller businesses to prevent unnecessary costs. Cox also affirmed that the SEC would coordinate with the Public Company Accounting Oversight Board [official website], which announced a four-point plan [press release] on Wednesday regarding revisions of the existing internal control standards.

The rules, which require public companies to implement internal controls to ensure accurate financial reporting and to seek confirmation of the controls by an external auditor, have prompted many small businesses to go private [JURIST report] in order to avoid the costs of compliance, according to a recent report [text, PDF] from the Government Accountability Office [official website]. The Washington Post has more.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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