This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Section 404 relief for small companies, FPIs

  • SEC (US Securities and Exchange Commission) (dark gray) Image

10 Aug 2006

The US Securities and Exchange Commission has offered smaller public companies and many foreign private issuers further relief from compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Two aspects of Section 404 are at issue: Section 404(a), which requires a report by management assessing the effectiveness of the company's internal control over financial reporting Section 404(b), which requires an auditor's attestation on internal controls The SEC would offer relief in three areas: Relief from Section 404 compliance dates for smaller companies (non-accelerated filers). The Commission proposes to: extend the date by which non-accelerated filers must provide the Section 404(a) management report from fiscal years ending on or after 15 July 2007, until fiscal years ending on or after 15 December 2007; and extend the date by which non-accelerated filers must begin to provide the Section 404(b) auditor's attestation to the first annual report for a fiscal year ending on or after 15 December 2008. These extensions would benefit about 44% of the domestic companies and 38% of the foreign private issuers that file periodic reports with the SEC. Relief from Section 404(b) compliance date for certain foreign private issuers. The SEC has adopted final rules allowing foreign private issuers that are accelerated filers but not large accelerated filers, and that file their annual reports on Form 20-F or 40-F, to defer their Section 404(b) auditor's attestation until fiscal years ending on or after 15 July 2007. These companies will be required to include the Section 404(a) management report in their annual reports for their first fiscal year ending on or after 15 July 2006. This extension would apply to about 23% of the foreign private issuers (these are in addition to the 38% mentioned previously). Transition relief for newly public companies. The Commission proposes a newly public company, including a foreign private issuer that is listing on a US exchange for the first time, would not be required to provide either a Section 404(a) management assessment or 404(b) auditor attestation report until it has previously filed one annual report with the Commission. Note that no relief is offered to a foreign private issuer that is a large accelerated filer.

Such companies must still comply with both the Section 404(a) and 404(b) requirements in their annual reports for years ending on or after 15 July 2006. Click for (PDF 45k). The press release has hyperlinks to the full text of the SEC rules.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.