Bucks congressman's plan to shield little firms from big audits
Is Fitzpatrick's "Fomenting Innovation" act actually a "Mediocrities" protection bill?
Bucks congressman's plan to shield little firms from big audits
Joseph N. DiStefano
It's ten years since the Enron scandal prompted the Sarbanes-Oxley act that requires stepped-up audits of big U.S. companies. President Obama has encouraged Congress to chip away SarBox paperwork requirements for "emerging" companies he hopes will hire more Americans.
So in 2010. the Dodd-Frank law exempted companies with public shares worht less than $75 million. Last Spring the so-called JOBS Act gave companies. with shares worth under $700M and sales under $1B, a five-year SarbOx audit delay.
Now US Rep. Mike Fitzpatrick, R-Bucks, is pushing a permanent SarbOx audit exemption for companies with shares under $250 million or sales under $100 million. He calls his bill (HB 6161) the "Fostering Innovation Act."
How would this help Bucks County? At a hearing in Congress Thursday, Jeffrey S. Hatfield, chief executive of Fort Washington-based Vitae Pharmaceuticals, plans to testify on behalf of the Biotechnology Industry Organization, an industry lobby, in support of Fitzpatrick's bill.
Vitae, which employs 55, has spent ten years working on therapies for kidney disease and other chronic sickness. Hatfield says he'd like to raise money from public investors by doing an initial public stock offering -- but SarbOx audits would cost Vitae a million dollars a year, he estimates, and that's too much for such a small firm.
Hatfield says previous trims to SarbOx have encouraged more biotech firms to file for IPOs. He says Fitzpatrick's exemptions would encourage still more.
But Columbia University Prof. John Coffey, a corporate-governance expert who will also testify, ridicules Fitzpatrick's bill as the "Mature Mediocrities Act." Previous SarbOx cuts resulted in Britain's 135-year-old, money-losing Manchester United football team filing a US IPO and winning exemption as an "emerging company," making the US an object of "mockery," Coffey notes.
He says Fitzpatrick's exemption would give the companies most in need of oversight and disclosure an "open-ended' exemption from audit scrutiny. Instead of continuing to offer investors the world's best protection, the U.S. is moving desperately toward wide-open markets, where investors had best beware. Fitzpatrick's willing to take that risk, if it will help companies raise more money and maybe hire more people.
How much will Fitzpatrick get in kickbacks if he gets this bill passed?— MikeP- Even if it was a good idea ( which it's not), the Dems will veto it anyway. Total paralysis in D.C.— Servo
- Sabanes-Oxley did such a great job at preventing the 2008 financial meltdown, didn't it? All the SarbOx compliance rules were in place, yet the Ratings companies talked out of both sides of their mouths, and Ernst & Young helped mislead Lehman investors just like Anderson did to the Enron investors 5 years earlier, and the revolving door between the SEC and the big brokerage houses continues. The presidential candidate who pledges to rid the government of anyone ever associated with Goldman Sacks and to put the Glass Steagall regulations back in place could probably win the election...— factcheck
While an exemptions for start ups requires a time limit, not a hundred year old foreign soccer team can claim, that would be a critical and necessary part of legislating. The republicans frequently come up with great ideas, with all of the substance of a twitter comment. But that is not how laws are made. From the inception of incorporation, for 5 years and with a reasonable dollar amount of sales and market value, some exemption should be allowed for. Additionally, SarbOx designed for Fortune 500 size companies that have been around for decades, should be amended to include a truncated audit for the exempt companies at their 5 year anniversary. The UCC gives unlimited social and political power to corporations and the people who control them. Therefore, they need exceptionally grueling governance to ensure the integrity of the market and not simply be a safe harbor for fraud. A more appropriately scaled audit after the 5 year exemption should prepare growth companies for the day when they will be large enough to have to be administered as well as they innovate.
this is a long-overdue measure from mr fitzpatrick to reduce the crippling regulatory burden liberals are placing on small businesses in this country
thank you, congressman!- von tirpitz: you do realize that the sarbanes-oxley act OF 2002! was signed by then President George W. Bush.
but that's ok. facts be damned. just keep blaming everything on dems.— Ryan - This bill is a great idea. There are way too many one size fits all regulations that affect small businesses more than big businesses. If I could, I would go even further and suspend a lot of archaic government regulations, including taxes, for small businesses that are cost prohibitive. We live in the age of the internet and people being able to vote with their feet.— AvoidSundanceVacations
- This would be a nice start, but the truth is that government is the single biggest hurdle to domestic commerce and there needs to be a focused effort to SEVERELY eliminate the endless laws, regulations, mandates, taxation & overall governmental interference which continues to anchor down American business, our free market and our overall economy. Fitz needs this legislation x 100 to make any impact on the domestic business community & its attitude towards re-instilling confidence.
<— kelprod2 - Sure, Kelprod,get rid of regulations. It worked so well for the economy in 2008.— mike l
- Mike I...it was governments artifical manipulation of the free market (thank you Barney Frank!!!) that caused the economic slowdown. It is the governments continued meddling which is keeping it depressed.
As usual & always...government IS the problem and NEVER the answer. Get the government out of the way and the free market will return a thriving economy.— kelprod2
