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Sarbanes-Oxley changes will aid firms, Cox says

WASHINGTON -- Rule changes for corporate financial controls will be significant, aimed at reducing compliance costs for companies while ensuring that investors are protected, the head of the Securities and Exchange Commission said yesterday.

In a speech, SEC chairman Christopher Cox alluded to revisions the agency has been planning in response to business complaints that a key requirement of a 2002 antifraud law is overly burdensome and expensive. Copies of his speech in London at a conference of an international securities regulators' group were distributed by the SEC in Washington.

Cox and the other four SEC commissioners are expected to tentatively adopt the changes at a public meeting Dec. 13. Some observers, including Lynn Turner, a former SEC chief accountant, have warned against a major easing of the rules, saying that would erode the investor protections in the 2002 Sarbanes-Oxley law.

Business critics of Sarbanes-Oxley, on the other hand, are making the case that its rules are hurting US competitiveness by driving some companies away from American securities markets.

Sen. Christopher Dodd, Democrat of Connecticut, in line to become chairman of the Senate Banking Committee in the new Congress, said this week he believes the complaints have been exaggerated by the critics. "I'm not quite as convinced as others are that there's as big a problem associated with Sarbanes-Oxley as some have suggested," Dodd said.

Cox said US regulators "will unveil significant changes" the requirement for companies to file reports on the strength of their internal financial controls and to fix any problems. "Those changes will be aimed at ensuring that the internal-control audit is top-down, risk-based, and focused on what truly matters to the integrity of a company's financial statements," he said.

"They will provide guidance for both companies and their auditors to permit common-sense reliance on past work and on the work of others."

Cox urged, in a recent letter to the independent board that oversees the accounting industry that it revise its auditing rules to adapt them to the size of the company whose books are being audited. Cox and Mark W. Olson, chairman of the Public Company Accounting Oversight Board, met Sunday to discuss differing approaches of the two agencies toward the requirement.

An advisory committee appointed by the SEC formally proposed in April that the agency exempt smaller companies from the internal-controls requirement -- a move that would affect about 70 percent of all public companies in the United States.

The SEC rejected that idea but said it would take a series of actions to improve the way the law works, including providing compliance guidance to companies of all sizes. That would allow companies to take a broad approach to the requirement, focusing on the parts of their business that present the biggest potential financial risk.

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