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Sarbanes-Oxley Rational Relief InitiativeTechNet is leading efforts to reduce the Sarbanes-Oxley Act’s compliance burdens and impacts on small companies, while maintaining the integrity of the Act’s corporate governance goals. The goal of our efforts is to reduce unnecessary costs and mitigate unintended consequences of the Sarbanes-Oxley Act which are impacting innovation. In coordination with the NVCA, NASDAQ and the technology industries TechNet will work with the Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB) and Congress to document and share information regarding costs of Sarbanes-Oxley compliance, and propose rational improvements to the legislation and regulations. Many observers believe that the Sarbanes-Oxley Act Section 404 (SOX 404) and its implementation by the SEC and PCAOB have gone beyond the level of regulation necessary to address financial and accounting fraud and improve corporate governance. The Act is widely viewed as having resulted in costs and administrative burdens that in certain cases outweigh its benefits in terms of improved corporate governance or increased investor confidence, particularly with respect to the costs and burdens imposed on small companies. On May 16, 2005, following a Roundtable process, the SEC released a Staff Statement on Management's Report on Internal Control over Financial Reporting to provide additional guidance and clarification on SOX 404 implementation. Also on May 16, the Public Company Accounting Oversight Board (PCAOB) issued a policy statement regarding SOX 404 implementation. There is concern, however, that this guidance has not had sufficient practical effect on implementation and more must be done to strike a balance between the Act’s worthy corporate governance goals and burdensome compliance requirements. Specifically, there is recognition that small companies are being disproportionately impacted by SOX 404. For smaller public companies, efforts to comply with and maintain certain Section 404 requirements have been increasingly costly and burdensome. The disproportionate cost burdens arising out of a “one-size-fits-all” approach of section 404 requirements stifle the ability of smaller companies to invest in research and development, to gain access to public capital markets and to innovate. The result is a direct impact on the competitiveness of smaller companies that are the growth engines of the U.S. economy. TechNet is committed to working closely with Congress, the SEC and PCAOB to address these concerns. Other Resources: TechNet/biotechnology/NVCA comment letter on Small Business Advisory Committee Report, April 2006 TechNet/biotechnology/NVCA letter to Advisory Committee on Smaller Public Companies, December 8, 2005 |
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