CAMBRIDGE, MA, December 12, 2007 – The following statement has been issued by Hal S. Scott, Director of the Committee on Capital Markets Regulation, in response to this morning’s testimony by SEC Chairman Christopher Cox before the House Small Business Committee:

The Committee on Capital Markets Regulation applauds SEC Chairman Cox’s testimony proposing the delay of an additional year before requiring that small companies get external audits under Sarbanes Oxley Section 404(b), in order to complete what amounts to a cost-benefits analysis of that requirement.   As we noted in our Interim Report of November 2006 and in our testimony in June 2007 before the U.S. House Committee on Small Business, Section 404 costs, averaging $4.4 million in the first year, have disproportionate impact on small companies.

Let’s wait to see whether these costs are substantially reduced by the SEC’s and PCAOB’s recent Section 404 reforms before applying them to small companies.  Unreasonable 404 costs will either prevent small private companies from going public, or drive them abroad to do so.  Indeed, our December 4th report on The Competitive Position of the U.S. Public Equity Market found that through the first three quarters of 2007, a remarkable 9.2% of U.S. companies did their IPOs only abroad.

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For Further Information:

Hal Scott
(617) 384-5364
hscott@law.harvard.edu

Tim Metz
Hullin Metz & Co. LLC
(646) 495-5136
tim@hmcllc.com