SEC-Sarbanes-Oxley Relief Bill Is Real American Jobs Act

Washington, D.C., October 13, 2011—Now that the U.S. Senate has voted down the expensive “American Jobs Act,” CEI scholars are praising a House subcommittee for passing bills—including some with bipartisan support—that will lift Securities and Exchange Commission (SEC) barriers to job creation at no cost to taxpayers. And this legislative package includes common-ground deregulatory solutions specifically endorsed this week by President Obama’s Council on Jobs and Competitiveness.

On October 5th, the House Financial Services Subcommittee on Capital Markets, chaired by Rep. Scott Garrett (R-N.J.), marked up legislation to clear SEC red tape and allow entrepreneurs more freedom to access capital from both retail and wealthy investors. These included the “Small Company Job Growth and Regulatory Relief Act” from Rep. Stephen Fincher (R-Tenn.) that would broaden the exemption from the onerous “internal controls” mandate of the Sarbanes-Oxley Act to companies with market capitalization up to $350 million. In this area, the Obama jobs council actually goes further in its policy prescription, recommending this week exemptions from many provisions of Sarbanes-Oxley for companies with up to $1 billion in market cap.

“President Obama said in one overlooked sentence of his address to Congress that the U.S. should clear red tape that keeps smaller companies from going public, and his jobs council followed through with these detailed recommendations,” says John Berlau, director of CEI’s Center for Investors and Entrepreneurs. “The subcommittee has produced legislation that furthers these goals and deserves the president’s support.”

Other parts of the package would double the threshold of shareholders for companies exempt from registration with the SEC. Bill Frezza, CEI fellow in technology and entrepreneurship and a Boston-based venture capitalist, adds: “Venture capital financing of innovative startup companies critical to our nation’s future is declining at a precipitous rate. Both Sarbanes-Oxley relief and an increase in the private shareholder threshold can help clear bottlenecks that prevent startups from delivering job growth.”

Berlau concludes: “In a time of tight credit, every dollar these companies can raise by going public and issuing shares is one less that they have to raise by borrowing from a bank. It’s time to free entrepreneurs and their shareholders from the yoke of Sarbanes-Oxley and other burdensome mandates.”