Saturday, December 30, 2006

SarBox Blues

There's something rotten at the heart of America's markets, and that something is the 2002 Sarbanes-Oxley Act. SarBox has put a hammerlock on America's small-time capitalism like no other law before. It's keeping small, innovative companies from getting the capital they need to grow and thrive. Along with the growing number of high-profile lawsuits against companies for what turn out to be differences of accounting opinion, U.S. capital markets are hurting.

As the chart shows, net equity issuance in the U.S. — a measure of how much equity is actually available on U.S. markets — has gone into an alarming decline since SarBox. The trend has accelerated as more companies go private.

It's pretty simple: Company CEOs, faced with lawsuits, a growing list of SEC requirements and the costs that go with both would rather be private and not have the headaches than list on a major exchange and be harassed daily. The SEC has eased some SarBox rules, but needs to do more to restore America's competitive edge.

Investor's Business Daily.


At 1/02/2007 10:03 AM, Anonymous Steve E. said...

From personal experience, I can attest that the operational side the business is also negatively impacted. The additional signoffs and procedural steps required by Sarbox does nothing but hinder efficiencies, and adds cost to products.


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