After reading over the weekend that DOGE is using an AI tool to identify thousands of rules that could be ripe for elimination, it struck me that the government is really serious about this “deregulation” thing. While DOGE’s presentation about the tool doesn’t call out the SEC as a case study, it does say there’s a September 1st goal for all agencies to complete the “DOGE AI Deregulation List.” The overall goal, according to DOGE, is to delete 50% of all federal regulations.

At this point, we can only speculate what might be on the “delete list” at the SEC. My crystal ball says there could be a couple executive compensation disclosure rules – but we don’t yet have a Reg Flex agenda that shows Chair Atkins’ top priorities.

What do the tea leaves say? In addition to recent PCAOB changes, Matt Kelly at Radical Compliance pointed out that a recent GAO report about the money companies are spending to comply with Section 404 of the Sarbanes-Oxley Act could be laying the groundwork for reform of that statute. The GAO analysis found what everybody already knows, which is that:

Larger (nonexempt) companies generally incurred higher overall Sarbanes-Oxley compliance costs, but these costs were proportionally more burdensome for smaller (exempt) companies. Nonexempt companies (generally those with $75 million or more in publicly held shares or companies not qualifying as emerging growth companies) had higher costs (19 percent) than their exempt counterparts, according to GAO’s analysis of a nongeneralizable sample of 96 companies.

Companies generally experienced increased audit costs when they transitioned from exempt to nonexempt status (became subject to auditor attestation because their public float or revenues grew above exemption thresholds). Audits of nonexempt companies involve more work because the incremental auditing standards that apply to them require more planning, control testing, and quality review. GAO’s analysis found a median increase of $219,000 (13 percent) in audit fees in the year a company became nonexempt. Audit fees generally leveled off in the year after transition.

Some aspects of Sarbanes-Oxley could be easy to refine. As John recently shared, the Society for Corporate Governance had suggested improvements to auditor attestation requirements as part of its recent comment letter on filer status & scaled disclosure, which would make things easier for some smaller companies.

As Matt highlights on his blog, the cost savings from a dramatic overhaul are less certain. The GAO report also cites a correlation between weak internal controls and intentionally misleading reports – and we know that even in this deregulatory environment, the SEC is still very interested in preventing and punishing fraud.

– Liz Dunshee