The rule changes being proposed by the Securities and Exchange Commission at a public meeting also seek to stiffen requirements for individuals to invest in hedge funds.

The proposed revisions to 2002's sweeping anti-fraud legislation were being tentatively adopted by SEC Chairman Christopher Cox and the agency's other four commissioners.

The SEC is acting in response to complaints by companies that a key requirement of the law enacted after a wave of corporate scandals is overly burdensome and costly.

The proposed changes provide company management with new guidelines covering several areas, including processes to identify potential risks to accurate financial reporting, evaluation of how effective internal financial controls are, and related documentation that company managers must maintain.

Because the operations of smaller companies are often less complex and sprawling compared with big corporations, the new approach would allow such businesses "to scale and tailor" their procedures, the SEC said.

"Companies of all sizes and complexities would be able to implement our rules more effectively and efficiently," it said.

For companies with market values ranging from $75 million (euro56.5 million) to $700 million (euro528 million), reduced requirements for testing internal controls and providing documentation are being proposed.

Smaller companies have complained most vocally to the SEC about the costs of complying with Section 404 of the Sarbanes-Oxley law, which requires companies to file reports on the strength of their internal financial controls and to fix any problems.

The SEC also moved Wednesday to address the rising incidence of fraud in the burgeoning hedge fund industry, proposing to raise the minimum financial requirements for individuals wanting to invest in the high-risk pools.

Under current rules, an individual must have at least $1 million (euro750,000) in net worth or annual income of $200,000 (euro150,773) to qualify. Added to that would be a requirement that an individual's assets include at least $2.5 million (euro1.9 million) in investments, excluding a personal residence.

The SEC also is proposing a new anti-fraud rule for hedge funds. The agency was thwarted by a federal appeals court last spring in its effort to bring hedge funds under its supervision. The narrower changes being put forward are not expected to be open to legal challenge.

U.S. hedge funds, now numbering more than 9,000 with assets estimated to exceed $1 trillion (euro750 billion), traditionally catered to the rich, as well as pension funds and university endowments, but are increasingly luring less wealthy investors.

The funds operate with minimal government supervision. Since 2001, the SEC has brought more than 60 cases charging hedge fund managers with defrauding investors of more than $1 billion.

In another proposed change, the SEC plans to allow companies to provide shareholders with online delivery of the proxy materials describing issues being put to a vote at annual meetings. Some business and labor groups have voiced concern about the plan, which is expected to save U.S. corporations some $500 million (euro377 million) a year or more in printing and postage costs.