March 7, 2006
I am writing to express my strong concern and dismay regarding the proposal for the SEC to exempt thousands of small companies from the internal rules required by the Sarbanes-Oxley Act.
After the corporate fraud scandals of Enron and Worldcom just a few years ago, a crisis of credibility occurred for millions of investors as to the accuracy of financial reports for all public companies.The result was Sarbanes-Oxley.
As of Nov. 14, 694 companies have disclosed material weaknesses in their annual reports to the Securities and Exchange Commission, or 14.8% of the 4,697 that have filed reports since the requirement took effect.
It seems to be shortsighted and unwise for the SEC to now weaken this law when its positive aspects are now just taking effect.
I must take the side of such qualified notables as Arthur Levitt, Paul Volcher and John Bogle that this proposal to disproportionally reduce the internal controls on small companies is a mistake and will lead to future scandals
for investors in the small-company sector.
The SEC should reject this proposal and not forget the past 5 years of corporate and financial fraud that lost millions for small and middle-class investors.