Toussaint Capital Partners Participates In
Roundtable Discussion on SOX Reform
On March 24th, three Congressmen on the Financial Services Committee convened
a roundtable discussion on the future of Sarbanes Oxley at the offices of NASDAQ
in New York City. At the invitation of Congressman Gregory Meeks (D-NY), Toussaint
had a seat at the table with Paul Williams, its president participating. Congressman
Meeks was joined by 2 of his colleagues, Rep. Tom Feeney (R-FL) and Rep. Pete
Sessions (R-TX). They convened the roundtable to hear from a cross-section of
interests regarding their experience with Sarbanes Oxley, particularly section
404 compliance. The group of about 25 persons included 10 CEO's, 8 CFO's and represented
a wide range of industries from across the country.
The forum was focused specifically on smaller public companies and the difficulties
they face in complying with section 404. Herb Wander, co-chair of the SEC Advisory
Committee on Smaller Companies, served as the moderator for the 2-hour session.
He noted that the Advisory Committee has issued its final draft report and recommendations.
The participants agreed that section 404 imposed significant financial and
other hardships on smaller companies. Several horror stories were recounted,
including a $70 accounting issue that led to over $500,000 in accounting fees
under section 404's external audit requirement. Even more significant, a representative
of a leading private equity firm related how SOX has directly impacted the U.S.
IPO market, driving smaller U.S. companies to go the merger route (often with
foreign companies) rather than contemplate doing an IPO with the associated
costs. In addition, the costs of SOX compliance practically invites foreign
companies to list on non-U.S. exchanges, diminishing the global reach and reputation
of the U.S. capital markets.
Several legislative fixes for section 404 were discussed including:
(i) Bringing clarity via legislation to the concept of "materiality";
(ii) Defining via legislation what constitutes a "de minimis" error;
and
(iii) Allowing voluntary compliance by smaller companies under section 404,
while maintaining CEO attestation.
The Congressmen intend to conduct several other forums prior to taking action
on any particular legislative proposal. It is expected that a definitive proposal
will be introduced after November 2006. If you have comments or ideas on the
reform of SOX, please send them to: Jameel.A-Johnson@mail.house.gov
or via hard copy to the Office of Congressman Gregory Meeks, c/o Jameel A.-Johnson,
Chief of Staff, 1710 Longworth House Office Building, Washington, DC 20515.
Dated: March 25, 2006
