Wednesday, September 20, 2006

Big Boys Look to Shore Up SOX

A group of CEOs of major CPA firms and investment houses along with past top bureaucrats has founded the Committee on Capital Markets Regulation. The committee plans to look into Section 404 of Sarbanes-Oxley, legal liability on public company reporting, regulatory processes and shareholders rights. One-time White House economic adviser Glenn Hubbard and former Goldman Sachs president John Thornton will be co-chairs while CEOs of Deloitte and PriceWaterhouseCoopers are among the two dozen other members. Hal Scott, Harvard Law School professor and one ot the directors of the committee, points out that in the present environment capital is leaving the U.S. for overseas capital markets and that private capital is replacing publicly-traded securities. Scott then calls for a more "risk-based" approach to regulation. Present Treasury Secretary Henry Paulson praised the committee, which plans a first report by November, for providing ideas for future debate regarding government regulation of the finance industry.

Though certainly not as big a threat to present government regulation levels as the lawsuit regarding the constitutionally of the PCAOB, this committee appears to be one more indication that financial institutions and large CPAs are growing weary of the restrictiveness of the present regulatory climate. If the Republicans maintain control of both houses after the 2006 election, do not be surprised to see some weakening of the more restrictive features of SOX in the next six months or so.


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