Monday, July 31, 2006

Sarbanes-Oxley reform

A July 31 Financial Times article focuses on one politician's drive to reform the Sarbanes-Oxley legislation. Tom Feeney, a congressman in Washington D.C., says that certain provisions of SOX impose significant time and cost burdens on companies forced to comply.

This, he has learned, is hampering our ability to attract public corporations to our capital markets. From FT's article, "Advocate of SOX reform points to capital markets leak":

Mr Feeney's beef includes the usual criticisms of SOX: that its most burdensome provisions - enshrined in section 404 - are adding unnecessarily to companies' auditing costs and that it is tying up too much executive time.

But he warns it has also led to an "outsourcing of America's 100-year lead in capital formation" as companies shun US stock markets and seek listings in London and Hong Kong instead.

"Last year, while I was on a listening tour of bankers associations and the Chicago [derivatives] exchanges, the evidence was starting to come out in dribs and drabs. Now there's a sort of fire hydrant of evidence that we have a huge leak in our capital markets," the Republican congressman says.

He casts himself in the role of "an American economic Paul Revere" with his warnings. "The British are coming," he says, using the words of the hero of the war of independence. "And by the way, so is Luxembourg coming, and Hong Kong, Shanghai and a dozen other markets. I think it has already started being bad for America."

For an earlier look at the rise of foreign listings and stirrings against SOX legislation, please see, "Exchange Fever".