http://www.fallstreet.com/nov106f.phpsnip>
The Fight to Remain Financial Capital of The World?
Signed into law on July 30, 2002, the goal of the Sarbanes-Oxley Act (SOX) was to “deter and punish corporate and accounting fraud and corruption” (Bush), and "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws" (Stated Objective). Although SOX was widely credited for helping restore investor confidence in the markets, it is about to come under attack.
Backing the attack against SOX is the Washington-based Chamber of Commerce, which lobbies for three million companies (Bloomberg). The ammunition being used is as follows: SOX regulations should be less restrictive because along with the Act’s stated objectives another “objective is to make sure that capital remains here in the United States and we don't drive it out because of over-regulation.” To get an idea of how imminent the blitzkrieg against SOX is, the aforementioned quote came from President Bush less than two-weeks ago.
Along with the brewing SOX battle, not to mention the recent hedge fund ‘registration’ court win against the SEC, another disturbing event is that the SEC is about to loosen margin requirements that were first put in place after the Crash of 29. By reducing institutional margin requirements from as high as 50% to 15% the markets would not become more dangerous but - supposedly - more ‘innovative’: “The move removes a key barrier to the competitiveness of the US capital markets as similar margin rules already exist in Europe, attracting increasing numbers of hedge funds...” (FT)
Obviously there are risks to innovating-away what were previously considered to be groundbreaking market safeguards. But the party line from many in America is that if everyone else is doing it (or not ‘doing it’ in the case of SOX), why not us? London is attracting more hedge fund activity and IPOs than the U.S., the largest IPOs today are coming out of Hong Kong, and even India is lining up IPOs. In the mind of U.S. regulators this is a call to arms.
The Margin Debate...What Debate?
Margin requirements are, per code, “For the purpose of preventing the excessive use of credit for the purchase or carrying of securities”. If reducing margin rates is now on the table, wouldn’t it be wise to at least save this policy option for when it can be used to help absorb a shock in the markets? (i.e. Dow crashes by 1,000 points and credit is tight, so margin requirements are reduced). Encouraging the use of more credit amidst a market boom wastes a potentially stimulative regulatory move.
Noticeably absent from the margin debate is Fed Chairman Bernanke - who has opted to keep his mouth closed since the Bartiromo debacle. In September 1996 Greenspan said “I guarantee that if you want to get rid of the
bubble that will do it.” With a reduction in margin requirements threatening to add fuel to what many are already calling a liquidity bubble will Bernanke soon speak up?
more....
Cheney Expresses Doubts About Sarbanes-Oxley
http://www.informationweek.com/management/showArticle.jhtml?articleID=193500718
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The Times also reported some advocates of change expect the Bush administration will use many of the recommendations to limit what they see as overzealous state prosecutions by figures such as New York State Attorney General Eliot Spitzer and abusive class-action lawsuits by investors.
The groups are also expected to try to cut Sarbanes-Oxley costs, a goal regulators have been mulling for months.
"The chutzpah of the corporate and Wall Street communities just know no bounds," said Bill Lerach, a top class-action lawyer from the law firm of Lerach Coughlin in San Diego.
"How -- in the light of ... the stock options scandals and the executive compensation disgrace in this country -- they could with a straight face ask Congress for more legal protection is baffling."
The lobbying campaign may put Cox in a difficult position. Known during his nine terms as a congressman from southern California's Orange County as an opponent of business regulation, he is now one of Washington's top regulators.
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