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.