SEC Advisory Committee on Smaller Public Companies

The Securities and Exchange Commission (SEC) Advisory Committee on Smaller Public Companies (the "committee") held a two day meeting at the SEC on Oct. 24-25, 2005. The committee has already made a number of formal recommendations to the SEC, and preliminary thinking of the various subcommittees pertaining to additional recommendations was discussed at the October 24-25 meeting.

SEC Chairman Cox Welcomes Committee
SEC Chairman Christopher Cox gave opening remarks at the October 24-25 meeting, thanking the committee members for their efforts. "The SEC is very much in need of the information and guidance you will provide," he said, noting he could relate to their experience as he started a small company with his father in the 1980s before entering Congress.

"The entirety of the principles you've adopted," said Cox, referring to the principles on which the committee's recommendations will be based, "beginning with investor protection, is consistent with our role as regulators." He reiterated the importance of these principles, including balancing costs and benefits to spend the economy's money wisely, maintaining a culture of entrepreneurship, and encouraging capital formation. He also acknowledged another principle adopted by the committee, "keeping it simple." Cox emphasized all the SEC commissioners were appreciative of the committee's work. Alan Beller, director of the SEC's Division of Corporation Finance, also thanked the committee.

Following Cox and Beller's remarks, committee co-chair Herb Wander briefly reviewed the committee's activity so far this year, noting that over 20 people (including investors, auditors, financial executives, analysts, and the Chairman of the Committee of Sponsoring Organizations of the Treadway Commission (COSO)) had testified at various public hearings sponsored by the committee. Additionally, hundreds of written and online responses had been received in response to the committee's requests for comment posted on the SEC website. [See also comment letters filed in response to SEC's Request for Comment issued in September, 2005, regarding implementation of Sarbanes-Oxley Section 404 by non-accelerated filers, available here.

The committee also held a number of meetings at which recommendations pertaining to regulations impacting small public companies were discussed, including a joint meeting with the SEC's annual forum on small business capital formation. Recommendations sent by the committee to the SEC in August, including a request to provide a further delay in the compliance date of Section 404 of the Sarbanes-Oxley Act (404) for non-accelerated filers, and recommendations pertaining to the accelerated filing deadlines for Form 10-K and Form 10-Q for smaller public companies, were part of the impetus for the SEC's final and proposed rules regarding 404 and the Form 10-K/Form 10-Q requirements, respectively, issued on Sept. 22, 2005.

Preliminary Thinking on Additional Recommendations
The various subcommittees of the SEC Advisory Committee were asked to report to the full committee their preliminary thinking on any potential additional recommendations they are considering. These were not yet formal recommendations, but at various stages of preliminary thought. Formal recommendations will be presented to the full committee to vote on at its next meeting on December 14, 2005.

Click on the following links to see summaries of each of the subcommittees' presentations. These summaries were prepared by FEI staff based on listening to the webcast of the meeting. An archived version of the webcast can also be directly accessed here.

• Internal Control (Section 404)
• Corporate Governance
• Accounting
• Capital Formation

Prepared Nov. 4, 2005 by Edith Orenstein (eorenstein@fei.org), Financial Executives International (FEI), based on listening to the webcast of the meeting. This summary does not represent FEI opinion, unless specifically noted above.