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The Securities and Exchange Commission (SEC) has issued two releases granting further relief from compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (SOX) to smaller public companies and many foreign private issuers.

Bloomberg reports that executives at smaller companies claim audits to test and certify their internal controls are so expensive they wipe out a significant portion, if not all of their profits. Objections have also been raised by foreign companies.

"It shows the commission is listening, and understood it needed to make some pretty significant changes in the way internal controls are carried out," Robert Pozen, chairman of MFS Financial Services Co. in Boston, Mass., told Bloomberg.

Jim Greenwood, president and chief executive officer (CEO) of the Biotechnology Industry Organization (BIO), agrees. "The proposal demonstrates that the SEC is considering the full weight of Section 404 on smaller public companies," said Greenwood. "Section 404 is creating costly, unintended burdens on smaller firms that frequently operate with limited or no revenues." BIO represents more than 1,100 biotechnology companies, academic institutions, state biotechnology centers and related organizations across the U.S. and in 31 other nations. BIO intends to submit comments on Wednesday's proposals, as well as the Concept Rules including a detailed framework taking a risk-based, cost-effective approach to internal controls.

"We have heard that the Section 404 reporting requirements impose a special burden on foreign private issuers, smaller companies and newly public companies. These companies play an important role in our capital markets, and these releases illustrate the Commission's commitment to improving the efficiency and effectiveness of Section 404 implementation for them," John D. White, Director of the division of Corporation Finance, said in a prepared statement. "We believe our proposed transition relief for newly public companies should enhance the attractiveness and cost-effectiveness of participating in our markets, both for companies contemplating IPO's and for foreign companies considering listing in the U.S. for the first time, without sacrificing important investor protections, and we look forward to receiving comment from a diversity of interested parties on that proposal."

The Commission will continue to work on its own, and with the PCAOB, to take several additional steps previously outlined on May 17, 2006, in SEC Press Release 2006-75 to improve the implementation of Section 404 so that it will work efficiently and effectively for companies and auditors of all sizes.

"You're only seeing one shoe drop today," John Coffee Jr., a professor of securities law at Columbia University Law School in New York, told Bloomberg, adding that the accounting board still needs to be heard. "This will not be a permanent solution."

For more information on the relief announced by the SEC,
Click Here

What brings customers in the door? For some firms, it's price. For others, it is a meaningful relationship. Occasionally, it is both. Sometimes, it is neither. In other words, customers, all customers, have a split personality.

Each of us has varying levels of interest and involvement in the purchases we make. Customers occupy a continuum from completely indifferent to fully engaged, depending on what they are purchasing and how they are being sold. It is the desire for a meaningful purchasing experience that differentiates us and the organizations with whom we do business.

In an environment where information is readily available, it can seem as if every company is competing on price. Companies competing exclusively on price, however, need to recognize that the key to success is efficiency and that they will be involved in constant price wars. Their customers are largely indifferent and will easily switch brands and companies.

Companies seeking to engage their customers by providing a more satisfying experience are building loyalty and repeat business. Engaged customers are less sensitive to price. Companies competing on the basis of experience, need to shift their focus from costs to revenues and learn that more isn't always better. In fact, for companies competing for engagement, they can be better off with fewer customers, if those customers are engaged.

"Tires and Bicycles: A Tale of Two Purchases", a new white paper by William D. Todor, Ph.D and John I. Todor, Ph.D., takes a closer look at the split personalities of customer experiences. The full report is available, Click Here.

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