The recent restatements from three puny companies-one of which faces possible delisting from Nasdaq-could reignite the debate over whether microcap companies should be required to comply with a key provision of the Sarbanes-Oxley Act as well as highlight a showdown between the SEC and the White House and Congress.

We're talking about Section 404b of the sweeping 2002 governance legislation, which requires companies to report to the public about the effectiveness of their internal control over financial reporting. The smallest public companies with a public float below $75 million have been given four extensions to design, implement and document these internal controls before their auditors are required to attest to the effectiveness of these controls. Opponents had been whining that complying with Section 404b would be too costly for the smallest companies and drive many of them to list their shares overseas.  Alas, this never happened.

Meanwhile, look at what transpired in the last week of last year.

On Dec. 30, Preferred Bank, a commercial bank focusing on the Chinese-American and other groups in southern California, said it would restate its September quarterly results as a result of a recent regulatory examination.

The day before, TierOne, a struggling Lincoln, NE bank that in November said it would restate prior results, announced that it received a letter from The Nasdaq Stock Market advising that, because the company has not maintained a minimum bid price of $1 per share for the previous 30 consecutive business days, it is not in compliance with the listing requirement.

Then there is the case of headphone maker Koss. It said it plans to restate its financials going back to 2006 and fired Sujata Sachdeva, the company's Vice President of Finance and Secretary, after it discovered unauthorized financial transactions that may exceed $20 million.

All three of these companies had market caps under $75 million at the time.

The fact that a string of small companies have needed to revise their financials is no surprise to corporate governance experts.

For example, companies with less than $75 million in market capitalization filed 884 restatements in 2006, up 40 percent from a year earlier, when they filed 633, according to a study at the time by Glass Lewis. In 2006, microcap companies filed 677 new material-weakness disclosures, up 18 percent from 573 a year earlier and just 158 in 2004.

In 2007, microcap companies had a restatement rate of 10 percent, more than any other group of companies, according to GL.

In 2008, Glass Lewis did not isolate its data for companies with less than $75 million in market cap. However, it did find that as a percentage of all companies, larger companies restated least often and smaller companies restated more frequently. Just 2 percent of the largest companies restated during 2008, down from 6 percent in 2007. By comparison, 8 percent of companies with $250 million to $750 million in market cap restated, although this was down from 10 percent

And all of the Glass Lewis reports showed that once companies begin complying, each succeeding year the restatement rate goes down.

Back in October, SEC chairman Mary Schapiro announced that the latest extension for these small companies would expire beginning with the annual reports of companies with fiscal years ending on or after June 15, 2010.

Schapiro, however, is at odds with the White House and Congress. The House bill that seeks to tighten regulation of the financial markets has a provision that exempts companies with less than $75 million market caps from complying with Section 404b. Just before election day White House chief of staff Rahm Emanuel supported this exemption.

Proponents of the exemption feel that complying would be too costly for small companies. However, Schapiro, who was tapped by President Obama to restore confidence in the financial markets, has a different agenda. She is more concerned about investor protection, and small retail investors are generally the ones who buy stock in micro-caps.

Hopefully when the final bill is put together, Congress will worry more about protecting investors than saving a few bucks for the companies most likely to harm investors.