Six years ago Henry Butler and I wrote about what we called the Sarbanes-Oxley Debacle. Well, it’s still a debacle after all these years, and having significant effects on business and international competition.
Yesterday’s WSJ opined, concerning the potential NYSE/Deutsche Borse merger that
whoever ends up owning the iconic trading venue, the question is whether Washington will allow any U.S. stock exchange to be an attractive destination for young companies. It’s clear to most stock-exchange watchers that no business combination can relieve the burden that the 2002 Sarbanes-Oxley (Sarbox) law places on firms seeking to join the public markets. This is no doubt one of the reasons that Mr. Niederauer sees advantages in a merger with a foreign partner that has most of its business overseas.
The editorial suggests expanding Dodd-Frank’s exemption from SOX 404(b) from companies with less than $75 million in public securities to those with less than a $250 million float. It relies on the SEC’s own 2009 study showing that the vast majority of companies find that the benefits of SOX compliance outweigh the costs.
Ironically, the same issue of the WSJ reports that Chuck Schumer is “favoring the German deal as the best way to protect New York.” Schumer says: “My sole motivation here is keeping New York the No. 1 financial center in the world, and I will be guided by that criteria far above anything else in making a decision.”
Schumer is supposedly worried about Chicago’s rise in the competing derivatives market. But Roger Altman, whose Evercore Partners is advising Nasdaq on its proposal to take over the NYSE, says “the greatest threat to New York is not Chicago. It’s Hong Kong and China, by a mile.”
All of which suggests that Schumer should have thought about all this back when he was helping to provide an entrée for these foreign competitors by backing SOX and Dodd-Frank. There’s still time for him to read Butler and my book.