The U.S. House Financial Services Committee’s Capital Markets Subcommittee held a hearing to examine the implementation and effects of the Sarbanes-Oxley Act, with a focus on whether internal control reporting requirements under Section 404, particularly the auditor attestation requirement in Section 404(b), create disproportionate barriers for companies seeking to enter the public markets. In opening remarks, Subcommittee Chair Ann Wagner characterised Section 404(b) as a “double audit” and said compliance costs can exceed USD 1 million per year for smaller and pre-revenue issuers, with costs not scaling to company size and surveys indicating rising burdens due to more hours, documentation, and broader audit scopes. She questioned whether the benefits are commensurate, citing persistently high internal control weaknesses and disclosures that occur only after financial restatements, and said some firms structure growth, fundraising and public float to avoid triggering 404(b). The remarks noted existing tailoring for emerging growth companies and smaller reporting companies, while arguing the overall framework remains complex and poorly suited to asset-light, intellectual property-driven and globally structured firms. The hearing is intended to gather testimony from market participants on real-world impacts of Sarbanes-Oxley compliance.
U.S. Financial Services Committee 2025-06-25
U.S. House Financial Services Committee probes Sarbanes-Oxley Section 404(b) costs in Capital Markets Subcommittee hearing
The U.S. House Financial Services Committee’s Capital Markets Subcommittee held a hearing to assess the Sarbanes-Oxley Act's implementation, focusing on Section 404(b) auditor attestation requirements. Subcommittee Chair Ann Wagner highlighted concerns over high compliance costs for smaller firms, questioning the proportionality of benefits given persistent internal control weaknesses. The hearing aims to gather testimony on the real-world impacts of Sarbanes-Oxley compliance.