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Dodd-Frank Act Exempts Non-Accelerated Filers from SOX Section 404(b)

Section 989G of the Dodd-Frank Act amends Section 404(b) of Sarbanes-Oxley to permanently exempt non-accelerated filers from the requirement that they obtain an auditors’ report on management’s assessment of the company’s effectiveness of internal control over financial reporting.  From the time Section 404 was first implemented in 2003, the Securities and Exchange Commission has repeatedly extended the effective date for compliance with subsection (b) by non-accelerated filers.  The Section 989G amendment took effect immediately upon enactment of the Dodd-Frank Act, a little more than a month after the Commission’s final extension expired on June 15, 2010.

Section 989G also requires the Commission to conduct a study to determine:

  • how the burden of complying with Section 404(b) might be reduced for companies with market capitalizations of between $75 million and $250 million while still maintaining investor protections; and
  • whether a reduction in or exemption from compliance with Section 404(b) would encourage such companies to list in their initial public offerings in the United States.

The Commission must report back to Congress by April 21, 2011.

Update: September 21, 2010

The Commission adopted amendments, effective today, to conform its rules and forms to the new Section 404(c) of Sarbanes-Oxley, as added by Section 989G of the Dodd-Frank Act, reflecting the exemption of non-accelerated filers from the requirements of Section 404(b).

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