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Christopher Cox |
US authorities appear to be ready to admit that regulation and reporting based on a rigid rules-base structure, exemplified by the original interpretation of Sarbanes-Oxley, has gone too far and is reducing the competitiveness of the country.
Christopher Cox, the Chairman of the Securities and Exchange Commission has spent the past week being questioned by Congress on the interpretation of Sarbanes-Oxley and its reporting requirements. Cox has continuously defended the Act, assuring Wall Street that overseas companies will return for US listings once they see that Sarbanes-Oxley has created a secure, quality market – and indeed this appears to be happening. Cox was also instrumental in the launch of new account reporting standards, AS5, designed to reduce audit overheads. But critics still say that he has done too little to reduce the cost of reporting on controls and has done nothing for smaller US companies.
However, last week, Cox admitted that the financial reporting system had become "unnecessarily complex for investors, companies and the markets generally" and that he had established a committee to look at whether the current accounting and reporting standards impose costs that outweigh the benefits. The committee will be chaired by Robert Pozen, chairman of MFS Investment Management and former vice-chairman of Fidelity Investments.
Separately, Henry Paulson, US Treasury Secretary, announced in a New York conference that his agency would be examining the structure of the US financial regulatory system and would release an action plan in early 2008. Paulson, a 30 year Goldman Sachs veteran, is an opponent of excessive regulation and has specifically warned against damaging the private equity groups and hedge fund industries.
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