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.
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]
[S. 2824 Introduced in Senate (IS)]
109th CONGRESS
2d Session
S. 2824
To reduce the burdens of the implementation of section 404 of the
Sarbanes-Oxley Act of 2002.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 17, 2006
Mr. DeMint (for himself, Mr. Ensign, Mr. Martinez, Mr. Inhofe, Mr.
Burns, and Mr. Allen) introduced the following bill; which was read
twice and referred to the Committee on Banking, Housing, and Urban
Affairs
_______________________________________________________________________
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 (15 U.S.C. 7262) is
amended--
(1) in subsection (a), by striking ``The Commission'' and
inserting ``Subject to subsections (c) and (d), the
Commission'';
(2) in subsection (b), by inserting ``, subject to
subsections (c) and (d),'' after ``for the issuer shall''; and
(3) by adding at the end the following new subsections:
``(c) Smaller Public Company Exemption.--The rules of the
Commission 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) has fewer than 1500 record beneficial holders of
securities;
``(4) 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 12 calendar months; or
``(5) 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) 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) shall establish 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 the 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 AND REPORT.
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 the United Kingdom 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 Congress not later than 1 year
after the date of enactment of this Act.
<all>
Introduced in Senate
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
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