[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5405 Introduced in House (IH)]








109th CONGRESS
  2d Session
                                H. R. 5405

   To reduce the burdens of the implementation of section 404 of the 
                      Sarbanes-Oxley Act of 2002.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 17, 2006

  Mr. Feeney (for himself, Mr. Meeks of New York, Mr. Sessions, Mrs. 
 Miller of Michigan, Mr. Hensarling, Mr. Jones of North Carolina, Ms. 
 Foxx, Mr. Garrett of New Jersey, Mr. Stearns, Mr. Tiahrt, Mr. Wicker, 
  Mr. Royce, Mr. Pence, and Mr. Flake) introduced the following bill; 
       which was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
   To reduce the burdens of the implementation of section 404 of the 
                      Sarbanes-Oxley Act of 2002.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Competitive and Open Markets that 
Protect and Enhance the Treatment of Entrepreneurs Act'' or the 
``COMPETE Act''.

SEC. 2. IMPLEMENTATION OF INTERNAL CONTROL REPORTING AND ASSESSMENT.

    Section 404 of the Sarbanes-Oxley Act of 2002 is amended--
            (1) in subsection (a), by striking ``The Commission'' and 
        inserting ``Subject to subsections (c), (d), and (e), the 
        Commission'';
            (2) in subsection (b), by inserting ``subject to 
        subsections (c), (d), and (e),'' after ``for the issuer 
        shall''; and
            (3) by adding at the end the following new subsections:
    ``(c) Smaller Public Company Exemption.--The Commission's rules 
under subsection (a) shall permit an issuer to elect voluntarily not to 
provide the assessment described in subsection (a)(2) and the 
attestation thereof described in subsection (b) if the issuer--
            ``(1) has a total market capitalization for the relevant 
        reporting period of less than $700,000,000;
            ``(2) has total product revenue for that reporting period 
        of less than $125,000,000;
            ``(3) the issuer has fewer than 1500 record beneficial 
        holders;
            ``(4) the issuer has been subject to the requirements of 
        sections 13(a) or 15(d) of the Securities Exchange Act of 1934 
        for a period of less than twelve calendar months; or
            ``(5) the issuer has not filed, and was not required to 
        file, an annual report pursuant to section 13(a) or 15(d) of 
        the Securities Exchange Act of 1934.
    ``(d) Random Audits.--The Commission's rules under this section 
shall provide that, after the first year for which an attestation and 
report is made by a registered public accounting firm under subsection 
(b), the assessment by the management of the issuer under subsection 
(a)(2) shall be subject to examination, attestation, and report on a 
schedule determined by a system of random selection, as specified in 
such rules. The Commission shall specify in such rules that not less 
than 10 percent of the issuers listed on each national securities 
exchange will annually be subjected to such examination, attestation, 
and report. Such random selection system shall be administered by the 
national securities exchange on which the securities of the issuer are 
listed.
    ``(e) De Minimus Standard; Additional Guidance; Independence.--In 
implementing the requirements of this section, the Commission and the 
Board--
            ``(1) shall alter the standard for review from a remote 
        likelihood standard for noting weaknesses under this section to 
        a 5 percent de minimus material weakness criteria (based on 5 
        percent of net profits);
            ``(2) specific guidelines for measuring the terms 
        `reasonable', `significant', and `sufficient' in the context of 
        internal control over financial reporting for issuers, 
        including--
                    ``(A) reference to specific examples of the 
                appropriate application of those terms; and
                    ``(B) establishment of a means for timely response 
                by the Commission or Board, as applicable, to requests 
                by issuers and registered public accounting firms for 
                guidance as to the appropriate application of those 
                terms; and
            ``(3) shall modify the rules concerning the independence of 
        registered public accounting firms to perform assessments under 
        subsection (b) to allow prudent interaction between such firms 
        and internal consultants.''.

SEC. 3. BRITISH ACCOUNTING SYSTEM STUDY.

    The Securities and Exchange Commission and the Public Company 
Accounting Oversight Board shall jointly conduct a study comparing and 
contrasting the principles-based Turnbull Guidance under the securities 
laws of Great Britain to the implementation of section 404 of the 
Sarbanes-Oxley Act of 2002. The Commission and the Board shall submit a 
report on the results of such study to the Congress not later than one 
year after the date of enactment of this Act.
                                 <all>