Text: S.2824 — 109th Congress (2005-2006)All Information (Except Text)

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Introduced in Senate (05/17/2006)


109th CONGRESS
2d Session
S. 2824


To reduce the burdens of the implementation of section 404 of the Sarbanes-Oxley Act of 2002.


IN THE SENATE OF THE UNITED STATES

May 17, 2006

Mr. DeMint (for himself, Mr. Ensign, Mr. Martinez, Mr. Inhofe, Mr. Burns, and Mr. Allen) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs


A BILL

To reduce the burdens of the implementation of section 404 of the Sarbanes-Oxley Act of 2002.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title.

This Act may be cited as the “Competitive and Open Markets that Protect and Enhance the Treatment of Entrepreneurs Act” or the “COMPETE Act”.

SEC. 2. Implementation of internal control reporting and assessment.

Section 404 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262) is amended—

(1) in subsection (a), by striking “The Commission” and inserting “Subject to subsections (c) and (d), the Commission”;

(2) in subsection (b), by inserting “, subject to subsections (c) and (d),” after “for the issuer shall”; and

(3) by adding at the end the following new subsections:

“(c) Smaller Public Company Exemption.—The rules of the Commission under subsection (a) shall permit an issuer to elect voluntarily not to provide the assessment described in subsection (a)(2) and the attestation thereof described in subsection (b), if the issuer—

“(1) has a total market capitalization for the relevant reporting period of less than $700,000,000;

“(2) has total product revenue for that reporting period of less than $125,000,000;

“(3) has fewer than 1500 record beneficial holders of securities;

“(4) 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 12 calendar months; or

“(5) 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.

“(d) De Minimus Standard; Additional Guidance; Independence.—In implementing the requirements of this section, the Commission and the Board—

“(1) shall alter the standard for review from a remote likelihood standard for noting weaknesses under this section to a 5 percent de minimus material weakness criteria (based on 5 percent of net profits);

“(2) shall establish specific guidelines for measuring the terms ‘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 the Board, as applicable, to requests by issuers and registered public accounting firms for guidance as to the appropriate application of those terms; and

“(3) shall modify the rules concerning the independence of registered public accounting firms to perform assessments under subsection (b) to allow prudent interaction between such firms and internal consultants.”.

SEC. 3. British accounting system study and report.

The Securities and Exchange Commission and the Public Company Accounting Oversight Board shall jointly conduct a study comparing and contrasting the principles-based Turnbull Guidance under the securities laws of the United Kingdom to the implementation of section 404 of the Sarbanes-Oxley Act of 2002. The Commission and the Board shall submit a report on the results of such study to Congress not later than 1 year after the date of enactment of this Act.