Investor Protection Bill To Face Key Exemption Hurdle Wed

By Fawn Johnson Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The House Financial Services Committee will vote Wednesday on a critical amendment to an investor protection bill that would exempt small and mid-size companies from audits required under the Sarbanes-Oxley corporate-reform law. The provision, sponsored by Reps. Scott Garrett (R., N.J.) and John Adler (D., N.J.), has the support of the White House, according to its sponsors. During committee debate on the measure Tuesday, Adler said White House Chief of Staff Rahm Emanuel has been asking for the exemption. Small companies claim internal controls mandated by Sarbanes-Oxley are too onerous for them. But Securities and Exchange Commission Chairman Mary Schapiro has said all companies would have to start outside audits of their controls beginning next June. It isn't clear how the amendment will fare in the committee. Chairman Barney Frank (D., Mass.) and Capital Markets Subcommittee Chairman Paul Kanjorski (D., Pa.) oppose it. But some Democrats will support it. In addition to Adler, Rep. Bill Foster, (D., Ill.) said he would vote for it. Kanjorski said he hoped the bill won't be "precipitously watered down," but the move to exempt smaller companies signals there could be further efforts like that as the bill moves through Congress. He expects several Democrats on the committee to support the exemption, predicting the vote would be close. Consumer Federation of America Director of Investor Protection Barbara Roper sent a letter to the committee Tuesday saying members shouldn't be fooled by the most recent version of the exemption proposal. The amendment would eliminate auditing requirements for "roughly half of all public companies with market capitalizations of less than $75 million," the letter said. Proponents of the exemption say it doesn't change anything about the current system. The SEC has repeatedly extended the deadline for non-accelerated filers to begin providing audited assessments of their financial reporting internal controls, according to Garrett, "an acknowledgement of continued concern about compliance costs." The final committee vote on the bill also is slated to take place Wednesday. It would allow the SEC to establish a harmonized fiduciary standard for stockbrokers and advisers who offer financial advice, give the SEC the ability to pay informants who provide key details in enforcement cases and empower the SEC to ban brokers from requiring customers to sign mandatory arbitration clauses. -By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@dowjones.com