Washington–The Securities and Exchange Commission has granted small insurers and other public companies with revenues of $75 million or less another year to comply with financial filing requirements of the Sarbanes-Oxley Act.
An insurers' trade group said the action would likely delay a move by state regulators to require more reporting by small mutual insurance companies.
SEC's decision on Section 404 of the federal financial disclosure law means small public companies won't have to file under that provision until July 2007.
The agency's unanimous decision last week to delay compliance probably means that the National Association of Insurance Commissioners will delay action on a filing requirement for small mutual insurance companies, according to the National Association of Mutual Insurance Companies based in Indianapolis, Ind.
Regulators have been considering a model rule requiring small mutuals to report some of the same information public companies must furnish under Sarbanes-Oxley, concerning internal accounting controls.
The NAIC's proposal for the added financial reporting similar to Sarbanes-Oxley Section 404 has been contentious, with NAMIC questioning the added cost for all companies and emphasizing the disproportionately high cost of compliance for small mutual companies.
"That the SEC has again extended compliance with Section 404 for small public companies should be observed by the NAIC," said William Boyd, NAMIC's financial regulation manager.
"The SEC's advisory committee of small public companies has noted to the SEC how disproportionately expensive compliance is for small companies," Mr. Boyd said. "Given this expense and the extent of existing insurer solvency regulation, it is only rational that the NAIC greatly trim what it has proposed, especially for small companies."
Mr. Boyd said the SEC's decision and the views of its small company committee "resonate with NAMIC" because NAMIC's own study of costs and benefits of SOX Section 404 "show how burdensome Section 404 is and how little is to be gained in the mutual insurer context."
NAMIC's study of mutual insurers found internal costs of compliance for Section 404 to be about $100,000 for companies with premium up to $100 million and additional, external costs to be slightly higher.
The SEC' Advisory Committee on Smaller Public Companies found small companies might spend more than $800,000 for compliance.
The SEC's decision to delay marks the second extension for compliance for so-called "non-accelerated filers."
These companies have market caps of $75 million or less. The provision requires companies to attest to the soundness of their internal controls and have their external auditors do the same. Large public companies were required to submit internal controls attestations earlier this year.
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