Competitive and Open Markets that Protect and Enhance the Treatment of Entrepreneurs Act, or the COMPETE Act - Amends the Sarbanes-Oxley Act of 2002 regarding the management assessment of internal controls in the annual report of each issuer of registered securities to require certain rules of the Securities and Exchange Commission (SEC) to permit a small public company to elect voluntarily not to provide in its annual report an assessment of (or a related public accounting firm attestation concerning) the effectiveness of its internal control structure and financial reporting procedures, if it meets specified size criteria. Includes among such criteria: (1) total market capitalization of less than $700 million; (2) total product revenue of less than $125 million; and (3) fewer than 1500 record beneficial holders.
Requires SEC rules to provide for random audits after the first year for which an attestation and report of such a small public company is made by a registered public accounting firm.
Directs the SEC and the Public Company Accounting Oversight Board (Board) to: (1) alter the standard for review from a remote likelihood standard for noting weaknesses to a 5% de minimus material weakness criterion (based on 5% of net profits); (2) establish specific guidelines for measuring certain terms; and (3) modify independence rules to allow prudent interaction between registered public accounting firms performing such assessments and internal consultants.
Directs the SEC and the Board to: (1) jointly study and report to Congress on the principles-based Turnbull Guidance under the securities laws of the United Kingdom; and (2) compare and contrast such principles to the implementation of Sarbanes-Oxley requirements.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5405 Introduced in House (IH)]
109th CONGRESS
2d Session
H. R. 5405
To reduce the burdens of the implementation of section 404 of the
Sarbanes-Oxley Act of 2002.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 17, 2006
Mr. Feeney (for himself, Mr. Meeks of New York, Mr. Sessions, Mrs.
Miller of Michigan, Mr. Hensarling, Mr. Jones of North Carolina, Ms.
Foxx, Mr. Garrett of New Jersey, Mr. Stearns, Mr. Tiahrt, Mr. Wicker,
Mr. Royce, Mr. Pence, and Mr. Flake) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To reduce the burdens of the implementation of section 404 of the
Sarbanes-Oxley Act of 2002.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Competitive and Open Markets that
Protect and Enhance the Treatment of Entrepreneurs Act'' or the
``COMPETE Act''.
SEC. 2. IMPLEMENTATION OF INTERNAL CONTROL REPORTING AND ASSESSMENT.
Section 404 of the Sarbanes-Oxley Act of 2002 is amended--
(1) in subsection (a), by striking ``The Commission'' and
inserting ``Subject to subsections (c), (d), and (e), the
Commission'';
(2) in subsection (b), by inserting ``subject to
subsections (c), (d), and (e),'' after ``for the issuer
shall''; and
(3) by adding at the end the following new subsections:
``(c) Smaller Public Company Exemption.--The Commission's rules
under subsection (a) shall permit an issuer to elect voluntarily not to
provide the assessment described in subsection (a)(2) and the
attestation thereof described in subsection (b) if the issuer--
``(1) has a total market capitalization for the relevant
reporting period of less than $700,000,000;
``(2) has total product revenue for that reporting period
of less than $125,000,000;
``(3) the issuer has fewer than 1500 record beneficial
holders;
``(4) the issuer has been subject to the requirements of
sections 13(a) or 15(d) of the Securities Exchange Act of 1934
for a period of less than twelve calendar months; or
``(5) the issuer has not filed, and was not required to
file, an annual report pursuant to section 13(a) or 15(d) of
the Securities Exchange Act of 1934.
``(d) Random Audits.--The Commission's rules under this section
shall provide that, after the first year for which an attestation and
report is made by a registered public accounting firm under subsection
(b), the assessment by the management of the issuer under subsection
(a)(2) shall be subject to examination, attestation, and report on a
schedule determined by a system of random selection, as specified in
such rules. The Commission shall specify in such rules that not less
than 10 percent of the issuers listed on each national securities
exchange will annually be subjected to such examination, attestation,
and report. Such random selection system shall be administered by the
national securities exchange on which the securities of the issuer are
listed.
``(e) De Minimus Standard; Additional Guidance; Independence.--In
implementing the requirements of this section, the Commission and the
Board--
``(1) shall alter the standard for review from a remote
likelihood standard for noting weaknesses under this section to
a 5 percent de minimus material weakness criteria (based on 5
percent of net profits);
``(2) specific guidelines for measuring the terms
`reasonable', `significant', and `sufficient' in the context of
internal control over financial reporting for issuers,
including--
``(A) reference to specific examples of the
appropriate application of those terms; and
``(B) establishment of a means for timely response
by the Commission or Board, as applicable, to requests
by issuers and registered public accounting firms for
guidance as to the appropriate application of those
terms; and
``(3) shall modify the rules concerning the independence of
registered public accounting firms to perform assessments under
subsection (b) to allow prudent interaction between such firms
and internal consultants.''.
SEC. 3. BRITISH ACCOUNTING SYSTEM STUDY.
The Securities and Exchange Commission and the Public Company
Accounting Oversight Board shall jointly conduct a study comparing and
contrasting the principles-based Turnbull Guidance under the securities
laws of Great Britain to the implementation of section 404 of the
Sarbanes-Oxley Act of 2002. The Commission and the Board shall submit a
report on the results of such study to the Congress not later than one
year after the date of enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line