Companies that try to stay on top of the ever-changing regulations coming out of Washington may have to shift gears under the new Securities and Exchange Commission leadership. Incoming chair Mary Schapiro — the Democrat whose nomination by the Senate was approved last week — plans to slow down some of her predecessor’s pet projects, and speed other proposals that Republican predecessor Christopher Cox had allowed to fall by the wayside.
For example, she plans to require that small publicly traded companies comply with the auditor-attestation requirement of the Sarbanes-Oxley Act — which they’ve been able to avoid since the law was passed nearly seven years ago. “Right now, we have a system where some issuers are complying with 404 and others are still exempt from it,” Schapiro said in written responses to several questions by Sen. Carl Levin. “It’s time we bring uniformity to the system.”
In her letter, which the Michigan Democrat’s office released on Friday, Schapiro gave further detail on her leanings as chairwoman of the SEC than she did during her testimony before the Senate Banking Committee earlier this month.
Among her disagreements with Cox is his implication that the Public Company Accounting Oversight Board could trust foreign inspectors to oversee auditing firms that review the financial statements of companies listed on U.S exchanges. Prompted by Levin whether Sarbox allows the SEC to delegate oversight to foreign oversight bodies and whether she would push through a proposal to do so, Schapiro simply answered, “No, I do not; and no, I will not.”
Schapiro also said that she favors a slowdown of the U.S. adoption of global accounting rules and indicated she would support higher capital requirements, the registration of hedge funds, proxy access, and say-on-pay proposals.
To be sure, Schapiro has more pressing demands in her first weeks in office. She has indicated that her highest priorities are helping the Obama administration reform the financial regulatory system, and fixing the internal enforcement issues at the SEC, which have been criticized for failing on several occasions to notice Bernard Madoff’s alleged $50-billion Ponzi-style fraud. Schapiro, whose last day as head of the Financial Industry Regulatory Authority was Friday, had yet to be sworn in as SEC chairman as of Monday morning.
As for Sarbox, Schapiro indicated that she will check in with small businesses to make sure “they have the tools they need to comply with 404.” Under Cox, the SEC’s so-called non-accelerated filers have received several one-year reprieves from fully following the internal-control provision of the act. As it stands, companies with a market capitalization of $75 million or less will have to provide attestation reports in their annual reports for fiscal years ending on or after December 15, 2009.
Since companies began complying with Sarbox earlier this decade, they have taken issue with the costs associated with Section 404(b), which governs how auditors review internal controls. In response, the SEC has been conducting a cost-benefit study of Section 404. The regulator has surveyed more than 2,000 companies and recently extended the deadline for responses from January 16 to the end of this week.