The U.S. Securities and Exchange Commission today voted to give small companies another year to comply with internal control reporting rules, known as Sarbanes-Oxley 404. As well, the regulator proposed to limit fund managers’ use of soft dollars.

The SEC voted to extend for an additional one year the compliance dates regarding its internal control reporting requirements rules for companies that are not accelerated filers. The amendments require a public company to include in its annual report a report by management on the effectiveness of the company’s internal control over financial reporting and an accompanying auditor’s report.

Under the new compliance schedule, a company that is not an accelerated filer, including a foreign private issuer that is not an accelerated filer, will begin to be required to comply with the SOX 404 requirements for its first fiscal year ending on or after July 15, 2007. A foreign private issuer that is an accelerated filer must begin to comply in the annual report for its first fiscal year ending on or after July 15, 2006.

The SEC is also soliciting public comment on several questions about the application of the internal control reporting requirements including questions regarding the amount of time and expense that companies that are not accelerated filers have incurred to date to prepare for compliance with the internal control reporting requirements.

The commission also voted to propose for comment amendments to filing deadlines for periodic reports, changes in accelerated filer definitions, and to publish for comment proposed interpretive guidance on money managers’ use of client commissions to pay for brokerage and research services.

Currently, the law provides a “safe harbor” by providing that a person who exercises investment discretion shall not be deemed to have acted unlawfully or to have breached a fiduciary duty under state or federal law solely by reason of having caused an account to pay more than the lowest available commission if that person determines in good faith that the amount of the commission is reasonable in relation to the value of the “brokerage and research services” received.

The proposed interpretive guidance would clarify that the scope of the safe harbor is limited to brokerage and research services that: satisfy the eligibility criteria in the statute; provide lawful and appropriate assistance to the money manager in carrying out his decision-making responsibilities; and, satisfy the requirement that the money manager make a good faith determination that commissions paid are reasonable in relation to the value of the products and services provided by broker-dealers in connection with his responsibilities to the advisory accounts for which he exercises investment discretion.

The commission also voted to publish for comment guidance on commission-sharing arrangements.