The SEC released a study regarding compliance with Section 404(b) of the Sarbanes-Oxley Act of 2002, as required by Dodd-Frank. Section 404(b) requires a public company's independent auditor to attest to management's assessment of the effectiveness of those internal controls. Dodd-Frank required the SEC to conduct a study to determine how the SEC could reduce the burden of compliance with Section 404(b) for companies whose market capitalization is between $75 and $250 million, while maintaining investor protections for such companies. Dodd-Frank also required that the study consider whether any methods of reducing the compliance burden or a complete exemption for such companies from Section 404(b) compliance would encourage companies to list on exchanges in the United States in their initial public offerings. The study also addresses the auditor attestation requirement with respect to an issuer's internal control over financial reporting pursuant to Section 404(b).
After considering the information gathered from internal and external sources, the staff set forth two principal recommendations: (1) the requirements of Section 404(b) for accelerated filers, which have been in place since 2004 for domestic issuers and since 2007 for foreign private issuers, should be maintained, and (2) activities that have potential to further improve both effectiveness and efficiency of Section 404(b) implementation should be encouraged.