To: SEC Advisory Committee on Smaller Public Companies
I am writing on behalf of MainSource Financial Group (MainSource) to comment on the Committee's draft report, which recommends and provides for Sarbanes-Oxley (SOX) exemptions and/or reduced standards for smaller public companies. Our company would fall under the "smallcap company" exemption.
Overall, I would strongly encourage that the proposed rules calling for a reduction and/or complete exemption in the reporting requirements be implemented for both "microcap" and "smallcap" companies for the following two reasons:
- The overall cost for these companies to comply with the myriad of rules and regulations is really extraordinary. The annual hard costs for MainSource to comply with these rules are in excess of $500,000. Adding soft costs, we have spent well in excess of $1 million on an annual basis to ensure compliance with the SOX rules. This ultimately represents in excess of 5% of our income and that does not seem appropriate in the cost-conscious environment that we operate under.
- The current SOX rules create an environment where relationships with auditors are much more strained. This includes the use of multiple accounting firms for audit and tax services, resulting in duplicative costs. Additionally, it is very difficult to use our current auditors for professional, technical and expert advice on the treatment of accounting transactions due to the fact that it may impair their independence. This does not seem to have been the intended result of SOX, but it is reality. Not being able to use your auditors for advice on accounting transactions where they have expertise, and will ultimately audit, seems wrong.
Please take the above points into consideration as you finalize this very important effort. Thank you and please call me at (812) 934-1645 if you would like to discuss.
Douglas I. Kunkel
Director - MainSource Financial Group