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Today, the House Financial Services Committee is holding a Capital Markets Subcommittee hearing, led by Subcommittee Chair Ann Wagner (MO-02), to examine the implementation and effects of Sarbanes-Oxley, particularly focusing on how certain provisions affect public companies and capital markets activity.

Read Subcommittee Chair Wagner’s opening remarks as prepared for delivery:

"Good morning. Thank you to our witnesses for being here today.

"Today’s hearing is about making our public markets work again for the companies that fuel our economy—small, innovative firms that want to grow, hire, and bring new products to market.

"We’re here to examine whether parts of the Sarbanes-Oxley Act, particularly Section 404, are doing more to burden those companies than to protect investors.

"When Sarbanes-Oxley, or SOX (socks), was passed in 2002, it had a clear purpose: to restore trust in financial reporting after several major corporate scandals.

"But more than two decades later, it’s time to ask whether its most burdensome provisions are still serving investors, or merely discouraging companies from ever going public in the first place.

"For many small companies, Section 404(b) has become a major obstacle. It requires companies not only to assess their own internal financial controls, but also to pay for an external auditor to effectively repeat that process. That’s why many refer to it as a 'double audit.'

"The cost can exceed $1 million per year, even for pre-revenue biotech firms and small-cap innovators.

"These costs don’t scale. Whether a company generates $50 million or $5 billion, the compliance checklist is largely the same. For a large company, that may be manageable. But for a startup, it’s often the difference between expanding operations or laying off staff.

"And compliance costs have not gone down over time. In fact, recent surveys show costs are rising, driven by more hours, more documentation, and broader audit scopes.

"At the end of the day, Main Street investors are footing the bill, whether it’s through reduced returns, fewer IPOs, or the lost chance to invest early in the next great American company.

"Meanwhile, the benefits are unclear. Internal control weaknesses remain stubbornly high. Many firms only disclose problems after issuing financial restatements. That’s not the sign of a healthy system.

"We’ve also heard from companies that structure their growth, fundraising, and even equity float to avoid triggering 404(b). That’s an indictment of the rule’s real-world impact.

"Capital formation shouldn’t be driven by how to avoid a duplicative audit. A regulatory framework that deters companies from entering the public markets doesn’t strengthen investor confidence, it weakens long-term economic competitiveness.

"To be clear, this is not about undermining investor protection. It’s about ensuring those protections are effective and proportionate. Congress and the SEC have taken steps to tailor SOX obligations for emerging growth companies and smaller reporting companies.

"But the current framework remains overly complex and poorly suited to today’s economy, especially for firms that are asset-light, IP-driven, and increasingly global in structure.

"Today’s hearing is an opportunity to hear directly from the people who live with these rules every day.

"Our job is to ensure that the path to becoming a public company is not paved with unnecessary barriers. Public markets should be open to companies of all sizes, not just those that can afford to navigate an outdated compliance regime."