Last week, Senators Barrasso (R-Wyo.) and DeMint (R-S.C.) offered legislation which seeks to curb some of the more costly burdens placed on companies through the Sarbanes-Oxley Act of 2002. Their bill, the Startup Expansion and Investment Act, targets Section 404 of Sarbanes-Oxley—a burdensome rule which has greatly increased regulatory compliance costs for many businesses. Rep. Ben Quayle (R-Ariz.) introduced a companion bill in the House earlier this year (H.R. 2941).

While implemented with the intention of securitizing and standardizing accounting measures of publicly traded companies, Section 404 has only led to increased costs for these entities, thus discouraging many small and mid-sized companies from going public. This, then, only allows the largest companies from operating in the public markets, disallowing the smaller firms from expanding and creating jobs. The Senate bill would raise the Section 404 exemption threshold from companies with a worldwide value of $75 million to companies with a worldwide value of $1 billion.

Before Sarbanes-Oxley was enacted, the Securities and Exchange Commission (SEC) stated that the compliance costs of Section 404 would be around $91,000. Yet, in 2009, the SEC conducted a study which found that companies actually spend around $2.3 million on Section 404-related compliance measures. In addition, President Obama’s own Jobs Council found that over the past three years, the number of new startups has decreased by 23%. The regulations enforced by Sarbanes-Oxley are discouraging the expansion of startups, thus inhibiting job growth in this tough economy.

In order to foster in further economic growth and job creation, it is imperative that the Startup Expansion and Investment Act is passed, thus increasing the threshold for Section 404 exemptions.