There is a compelling record demonstrating that the costs of complying with Section 404 are large and disproportionately high for small public companies.
Thomas M. Sullivan, Chief Counsel, SBA Advocacy

Chief Counsel for Advocacy Thomas M. Sullivan commended the U.S. Senate Committee on Small Business & Entrepreneurship for holding a hearing recently on the impact of Section 404 of the Sarbanes-Oxley Act on smaller public companies.

Bestway, the smallest of the publicly held North American rent to own companies, cited the nearly $800,000 in annual expenses to comply with government regulations as a primary reason for it's voluntary de-listing from NASDAQ in 2004 (see story). Company officials said the money would be better spent opening new stores.

In written testimony, Sullivan said, “The topic of how the Sarbanes-Oxley Act impacts small business is an important one, and the small business community will benefit by this Committee’s focus on the proposals under consideration by the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB).”

Sullivan said that “There is a compelling record demonstrating that the costs of complying with Section 404 are large and disproportionately high for small public companies. . . Advocacy believes that the excessive cost of Section 404 internal controls reporting may restrict a new generation of small innovative companies from seeking capital in the U.S. capital markets.”