June 12, 2005
I commend you for looking into issues affecting small public companies. As an individual investor who focuses on small-cap issues, I believe there is a DESPERATE need to ease the burden of Sarbanes-Oxley on very small public companies. The costs of complying with Section 404 are OVERWHELMING for too many small public companies. Not just dollars but management time makes compliance ridiculously expensive for such small companies. I attend many annual shareholder meetings of small companies, and I am hearing a universal howl of disgust at the costs and burdens of Section 404. How are many such companies responding? They are taking advantage of archaic SEC rules about the distinction between beneficial and record holders to fully deregister and delist their securities--THIS IS A HORRENDOESLY DESTRUCTIVE TREND It has already crippled faith in the small-cap market. I have personally had three companies pursue such deregistering Ohio Art, Lynch Interactive and Winmill, and the result in each case has been a severe destruction in market price and liquidity. I fear an EVER GREATER RUSH FOR THE EXITS by small public companies if the current one-year reprieve given to small public companies is not made permanent. PLEASE exempt such small companies from Section 404 compliance--after all, what good is Section 404 to investors such as myself if my companies deregister themselves? Please think about this.