By a vote of 62-35, the US Senate has rejected an attempt to water down Sarbanes-Oxley.

The move to neutralise Sarbox was done through the back door, in the form of an amendment put up Republican Jim DeMint who tried attaching it to a bill that was aimed at boosting investment in research, and improving science, engineering and math education. If passed, the amendment would have allowed companies with a market cap of less than $700 million to opt out of Section 404 which requires them to run a ruler over their internal controls and have those checks signed off by an external auditor.

In response, the Senate unanimously backed moves by federal regulators to fine-tune Section 404, in effect putting the SOX-bashers back in their place.

Section 404 has left small companies in a lather but remove it, and the law would be regarded as having no teeth.

That's why the DeMint amendment came under some fire from various groups including the Council of Institutional Investors which wrote this letter to Senate Banking Committee chairman Christopher Dodd, saying the rule had to apply to every company, regardless of size.

Senator Dodd said the DeMint amendment would have allowed 70 per cent of companies to get out of complying with Sarbanes-Oxley.

"The Senate rejected an approach that would weaken investor protections and make it more likely for investors to be harmed by the malfeasance that caused the collapse of Enron and WorldCom. So this was a good day both for America's investors and for America's small and mid-size businesses," he said in this statement.