House Committee Hearing Assesses Sarbanes-Oxley Act’s Impact on Capital Markets

The effects of the Sarbanes-Oxley Act (SOX) are being discussed Wednesday (June 25) in a hearing held by the House Financial Services Committee’s Capital Markets Subcommittee.

The hearing is focused on how some provisions of SOX affect public companies and capital markets, the Committee said in a Wednesday press release.

Subcommittee Chair Ann Wagner, R-Mo., who is leading the hearing, said in her opening remarks that while SOX was passed in 2002 to restore trust in financial reporting after some corporate scandals, some of its provisions may have become too burdensome.

Wagner pointed to Section 404(b), which requires companies to pay for an external auditor to assess their internal financial controls, after they have done so themselves.

This provision created what is commonly referred to as a “double audit,” the cost of which can exceed $1 million a year, Wagner said.

“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,” Wagner said in her remarks.

In addition, Wagner said, the benefits are unclear, internal control weaknesses remain high, and some companies structure their growth, fundraising and equity float to avoid triggering 404(b).

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

Rep. David Scott, D-Ga., a member of the Capital Markets Subcommittee, said in a Wednesday post on X that “undermining” SOX would reduce investor confidence.

“Efforts to gut SEC enforcement, undermine Sarbanes-Oxley & tie funding to deregulation, weakens our markets and makes investors more vulnerable,” Scott said in the post. “These actions not only erode stability but are shown to reduce investor confidence — particularly in smaller public firms.”

Efforts to gut SEC enforcement, undermine Sarbanes-Oxley & tie funding to deregulation, weakens our markets and makes investors more vulnerable. These actions not only erode stability but are shown to reduce investor confidence-particularly in smaller public firms. See below pic.twitter.com/VUGtmE9u9u

— Rep. David Scott (@repdavidscott) June 25, 2025

When Trustmi introduced a Sarbanes-Oxley (SOX) Compliance solution for business payments in 2024, the company said many organizations struggle with the complexity associated with SOX compliance as they increasing regulatory requirements.

At the time, the SEC had recently adopted rules requiring organizations to disclose material cybersecurity incidents they experience, as well as information on their cybersecurity risk management, strategy and governance.