Regulators yesterday gave small public companies and foreign businesses whose stock trades on U.S. exchanges a one-year extension for complying with controversial new rules on financial controls.
Securities and Exchange Commission officials said the delay would apply to several thousand firms, many of which argued they would have trouble meeting July deadlines for vouching for the accuracy of their fiscal checks and balances.
Under the new timetable, those companies must begin certifying the effectiveness of their internal controls for the fiscal years ending on or after July 15, 2006. Controls cover such things as requiring multiple signatures on payroll checks and limiting computer access to a company's sensitive financial data.
Donald T. Nicolaisen, the SEC's chief accountant, reiterated yesterday that the control provision is "among the most important parts of the Sarbanes-Oxley Act," a 2002 corporate-responsibility law passed after financial scandals devastated investors. The control reviews are supposed to help executives detect and prevent fraud and mistakes.
But the rules have produced a fierce backlash from trade groups, who say they cost millions of dollars without producing sufficient benefit. SEC officials will host a conference April 13 to hear corporate concerns about the costs and what some say are the inefficiencies of the internal control reviews.
Alan L. Beller, director of the agency's Corporation Finance Division, said yesterday's delay "strikes the right balance." He said companies should use the extra year to beef up their review process rather than drag their feet.