[Congressional Record Volume 152, Number 119 (Thursday, September 21, 2006)]
[Senate]
[Pages S9898-S9899]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 3919. A bill to assist small business concerns in complying with 
the Sarbanes-Oxley Act of 2002; to the Committee on Small Business and 
Entrepreneurship.
  Mr. KERRY. Mr. President, in order for the United States to continue 
to stand for the fairest, most transparent and efficient financial 
markets in the world, I believe we must provide assistance to America's 
small public companies in their efforts to comply with the Sarbanes-
Oxley Act.
  Just a few years ago, the trust and confidence of the American people 
in their financial markets was dangerously eroded by the emergence of 
serious accounting irregularities by some companies and possible 
fraudulent actions by corporations like WorldCom, Inc., Enron, Arthur 
Andersen and others. The shocking malfeasance by these businesses and 
accounting firms put a strain on the growth of our economy. The 
misconduct by a few senior executives has cost the jobs of thousands of 
hard-working Americans. The lack of faith in our financial markets 
contributed to an overall decline in stock values and has caused grave 
losses to individual investors and pension funds.
  By all accounts, Sarbanes-Oxley has been effective in bringing 
accountability to corporate governance, auditing, and financial 
reporting for public companies. The dark days of the Enron scandal have 
given way to a new corporate culture that embraces responsibility and 
transparency, and for this we have Sarbanes-Oxley to thank. Sarbanes-
Oxley has helped restore confidence in our capital markets and helped 
improve our nation's future economic growth.
  However, with compliance also comes cost. And while the cost of 
complying with the law is small enough to be absorbed by larger 
corporations, smaller public companies, particularly small minority 
public companies, have been disproportionately affected by these costs. 
Small business is the engine of economic growth in our Nation. Almost 
60 percent of Americans are employed by small businesses. Small 
business growth has been critical in developing the high wage jobs for 
America's future.
  Unfortunately, an April 2006 report to the Senate Committee on Small 
Business and Entrepreneurship by the United States Government 
Accountability Office (GAO) found that small public firms are incurring 
much higher audit fees and increased costs in complying with the 
Sarbanes-Oxley Act.
  The report finds that of the 2,263 public firms with market 
capitalization of less than $75 million, just 66 have fully implemented 
Section 404 of the law that requires firms to construct formal internal 
control frameworks and filed internal control reports. These 66 firms 
reported paying $1.14 in audit fees per $100 of revenue, compared to 
just $.13 per $100 for firms with greater than $1 billion in market 
capitalization. I believe we must take action to help small

[[Page S9899]]

companies comply with the regulatory burdens of the Sarbanes-Oxley Act.
  In addition to the costs associated with internal controls, 81 
percent of small firms responding to the GAO survey said they brought 
in outside consultants to comply with the Act. Nearly half of the small 
firms reported ``opportunity costs'' related to complying with the 
regulatory burden placed on them by the Sarbanes-Oxley Act such as 
deferring or canceling operational improvements, and more than one-
third of respondents were forced to defer or cancel information 
technology investments. Too many small firms simply do not have the 
resources and expertise necessary to implement the formal internal 
control frameworks required by Section 404, and as a result, they are 
disadvantaged compared to larger firms that are absorbing these costs.
  The U.S. Securities and Exchange Commission has provided a lengthy 
compliance period for small businesses to comply with the Sarbanes-
Oxley regulations and is attempting to develop additional methods to 
ease the regulatory burden. However, I believe additional efforts are 
needed.
  In order to assist these firms with the increased costs of 
implementation and help our small businesses keep our economy moving 
forward, I am introducing the Small Business Sarbanes-Oxley Compliance 
Assistance Act of 2006. The bill would authorize the U.S. Small 
Business Administration to award grants to small public companies and 
small business concerns to help lessen the burden of these costs. If 
Congress is asking these small firms to bear the burden of cost for 
compliance with Sarbanes-Oxley, the least we can do is chip in and help 
pay for it. My legislation authorizes $5 million to be awarded annually 
through 2011.
  My legislation also creates a task force, assembled by the SBA Chief 
Counsel for Advocacy, and comprising of representatives from the SEC 
and other appropriate bank regulatory agencies, to report semi-annually 
on how to assist small public companies in complying with Sarbanes-
Oxley. My hope is that this task force will continually find new ways 
to lift the regulatory burden on small businesses attempting to comply 
with the law. Each report of the task force will be required to 
evaluate upgrades or alternatives to the SEC's Electronic Data 
Gathering Analysis Retrieval System so that companies might submit 
filings to the SEC without the need for third party intervention. The 
task force will also report on the potential to reduce inefficiencies 
related to SEC filings; the feasibility of synchronizing filing 
requirements for substantially similar small firms; whether the SEC and 
bank regulatory agencies should commit additional resources to aiding 
small public firms with filing requirements; whether the SEC needs to 
publish guidance on reporting and legal requirements aimed at assisting 
smaller public firms; and the feasibility of extending incorporation by 
reference privileges to other Government filings containing equivalent 
information.
  This legislation will help some but not all of the thousands of small 
firms that are public or hope to become public. As more information 
becomes available, I am hopeful that the task force will provide ideas 
on how the SEC can help more of the small, non-accelerated filers 
implement the Sarbanes-Oxley regulations. We must do all we can to 
insure that small firms can demonstrate that transparency and 
accountability in the private sector is thriving without having to 
incur such a burdensome cost. This legislation is supported by the 
National Black Chamber of Commerce as well as Small Business Majority. 
I ask all my colleagues to support this legislation.
                                 ______