Subject: File No. 265-23
From: Wade Thomas
Affiliation: Compliance Director

April 11, 2006

There is a clear answer that emerges from the responses - the committee should forward the recommendations to the SEC and the SEC should adopt them.

Just look at the figures of the responses as they relate to the recommendations concerning exemptions for smaller companies:

Total responses (thru April 7): 187
Applicable to Sox exemption recommendations: 167
Support recommendations: 139 (83%)
Oppose recommendations: 28 (17%)

Of the 28 letters opposing the Sox recommendations, 9 are public accounting firms including the "Big 4" and 2 more are the national organizations of accountants (AICPA, IMA).

Remember the original estimate by the government of how much Sox was expected to cost companies? About $90,000. As we all know, that turned out to be a cruel joke. Our total for first year Sox of external costs (auditor fees and consultants)was well over $1 million. Internal costs most likely at least matched that figure. Imagine if we could have spent that on further development of our product Or delivered that amount to the bottom line? And what benefit did we get? No where near the cost.

The fact is the smaller companies do not present the same risk to the market as the larger corporations. They are not as widely held and whole retirements won't be lost with their failures. Besides, only the very smallest are proposed to be entirely exempt from Sox. The small companies will still have to implement Sox internally. With the required certifications, no (wise) company is going to take chances with their financial statements.

There is a clear right answer here, reflected by the wide disparity in the responses above. The best answer is to exempt. Not to try to "right-size" the regulations or form another committee or do another study. Ambiguous rules or regulations will never do the job, as the initial implementation proves. The implemenation rules will be ambiguous to handle all the possibilities. Accounting firms will err on the side on conservatism and do more than necessary with ambiguous rules, with the result being higher costs than necessary.

Instead of giving all this money to the accounting firms, let companies spend it on their product or service, or research and development, or hire additional resurces to secure the success of the company. Far better uses.

The committee did all the work necessary to support the recommendations. My congratulations to them for a job well done. I am skeptical the right answer will be reached based on the right motivations.