110 HR 1780 IH: Small Business Securities Protection Act U.S. House of Representatives 2007-03-29 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 110th CONGRESS 1st Session H. R. 1780 IN THE HOUSE OF REPRESENTATIVES March 29, 2007 Mr. Kirk (for himself, Mr. Israel, Mr. Sensenbrenner, and Mr. Regula) introduced the following bill; which was referred to the Committee on Financial Services A BILL To improve the implementation of section 404 of the Sarbanes-Oxley Act of 2002.

1.

Short title

This Act may be cited as the Small Business Securities Protection Act.

2.

Additional implementation requirements

Section 404 of Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262) is amended by adding at the end the following new subsections: (c)

Implementation

Within 90 days after the date of enactment of the Small Business Securities Protection Act, the Commission shall prescribe rules, or amend existing rules, and the Board shall amend standards, in each case as applicable to issuers under subsections (a) and (b) of this section, that incorporate the following: (1)risk-based concepts in evaluating and assessing internal control over financial reporting for issuers, including— (A)the establishment of priority standards and identification of higher risk internal control areas that are to be assessed; (B)the frequency of testing of internal control areas; (C)time periods for implementing controls following operational changes or additions; and (D)standards for auditors to rely on management workpapers in internal control assessments; (2)specific guidelines for measuring the terms material, 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; (3)a requirement that the Board consider the efficiency of audit practices in its inspections conducted under section 104; (4)specific alternative requirements for smaller issuers that reflect— (A)the relative size and complexity of smaller issuers; and (B)the relative financial and manpower burdens placed on smaller issuers in testing and documenting internal controls, taking into account the interests of investors and other stakeholders in smaller issuers; and (5)revised standards for independence by auditors to permit the rendering of internal control advice for resolution of internal control issues and related liability safe harbors for auditors providing such advice to smaller issuers. (d)

Definition of smaller issuer

For purposes of subsection (c), the term smaller issuer means an issuer that meets any of the following conditions as of the end of its fiscal year: (1)the total market capitalization of the issuer is less than $700,000,000; (2)the issuer has fewer than 300 record and beneficial holders of voting and non-voting common equity; (3)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 (4)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..