Senate rejects attempt to weaken Sarbanes-Oxley

WASHINGTON (Reuters) - The U.S. Senate on Tuesday defeated a Republican attempt to weaken 2002's post-Enron Sarbanes-Oxley laws by making it optional for many corporations to comply with a controversial section on internal controls.

By a vote of 62-35, the Senate set aside an amendment to make compliance with Sarbanes-Oxley's Section 404 optional for companies with total market value of less than $700 million.

The amendment was offered by South Carolina Republican Jim DeMint, who tried to attach it to a bill on the Senate floor that was focused chiefly on boosting investment in research, and improving science, engineering and math education.

In response to the amendment, defenders of Sarbanes-Oxley proposed and won passage, by a vote of 97-0, of a symbolic Senate statement expressing support for efforts already under way by federal regulators to fine-tune Section 404.

That statement was offered by Connecticut Democrat Christopher Dodd and Alabama Republican Richard Shelby -- the current and former chairmen of the Senate Banking Committee.

"By these two votes, the Senate today made a strong statement ... to support protecting investors," said Dodd, a presidential candidate, in a statement. "We rejected an approach that would weaken investor protections."

DeMint's office could not be reached for comment.

Business interests have been attacking Sarbanes-Oxley's Section 404 as too costly and invasive almost since it was adopted in the landmark corporate governance and accounting reforms that followed a wave of book-cooking scandals beginning with the 2001 collapse of former energy trader Enron Corp.

Section 404 requires publicly traded corporations to disclose more about their internal financial controls, or how they keep their books in order. It also requires a company's outside auditor to give a public assessment of the controls.

The law was meant to reduce failures seen frequently during the Enron-era scandals on the part of auditors, executives and directors who neglected to keep an eye on internal controls.

Supporters of the law say it has helped reduce corporate fraud. But there is also wide agreement that implementing Section 404 has been too costly and complex. The Securities and Exchange Commission and the Public Company Accounting Oversight Board (PCAOB) are working on changes to the law.