Rule changes by SEC called significant

WASHINGTON — Rule changes for corporate financial controls that regulators will soon put forward will be significant and aimed at reducing compliance costs for companies while ensuring that investors are protected, the head of the Securities and Exchange Commission said Thursday.

SEC Chairman Christopher Cox, in a speech in London, alluded to revisions the agency has been planning to make in response to business complaints that a key requirement of a 2002 anti-fraud law enacted after the wave of corporate scandals was overly burdensome and expensive.

Cox and the other four SEC commissioners are expected to tentatively adopt the changes at a public meeting on Dec. 13. Some observers, including Lynn Turner, a former SEC chief accountant, have warned against a major easing by the SEC of the rules — saying that would erode the investor protections in the 2002 Sarbanes-Oxley law.

Business critics of Sarbanes-Oxley, on the other hand, are making the case that its rules are overly stringent and are hurting U.S. competitiveness by driving some companies away from American securities markets.

Sen. Christopher Dodd, D-Conn., in line to become chairman of the Senate Banking Committee in the new Congress, said this week he believed the rules' effect on competitiveness was exaggerated by the critics. "I'm not quite as convinced as others are that there's as big a problem associated with Sarbanes-Oxley as some have suggested," Dodd told reporters.

Cox said the U.S. regulators "will unveil significant changes" to the implementation of the key part of the law, the requirement for companies to file reports on the strength of their internal financial controls and to fix any problems.

"Those changes will be aimed at ensuring that the internal-control audit is top-down, risk-based and focused on what truly matters to the integrity of a company's financial statements," he said. "They will provide guidance for both companies and their auditors to permit common-sense reliance on past work and on the work of others."

In a recent letter to the independent board that oversees the U.S. accounting industry, Cox urged that it revise its auditing rules under the internal-controls requirement to adapt them to the size of the company whose books are being audited. Cox and Mark W. Olson, chairman of the Public Company Accounting Oversight Board, met Sunday to discuss differing approaches of the two agencies toward the requirement.