In a speech for the US Chamber of Commerce’s First Annual Capital Markets Summit, Christopher Cox, SEC Chairman, came out in support of the somewhat contentious Section 404 of Sarbanes-Oxley. Cox spoke days after the Chamber of Commerce came out with a six-point plan for addressing the mounting criticism that US markets are losing out to other capital markets because of the stringent requirements of Sarbanes-Oxley.The Chamber had suggested that Sarbanes-Oxley be merged into the 1934 Federal Securities Act to give the SEC clearer authority on being able to enforce it.Cox said: Yours is not the first, nor will it be the last, outside group to tell us that there are significant direct and indirect costs that come along with the benefits of Sarbanes-Oxley. The SECs own analyses of Section 404 of Sarbanes-Oxley are in general agreement with what the Government Accountability Office, the Schumer-Bloomberg report, the Hubbard-Thornton report from the Committee on Capital Markets Regulation, and your own Commission have found: that while a portion of the first-year compliance experience of Sarbanes-Oxley undoubtedly reflected start-up costs and, in many cases, long-neglected maintenance by companies of their internal control systems and procedures it is undeniable that much of the cost was attributable to excessive, duplicative, or misdirected efforts.As your report noted, were working to eliminate the unnecessary costs of 404 compliance. We are serious about it, and so is the PCAOB.That said, it is wrong to conflate the implementation problems of 404 with the entirety of the Sarbanes-Oxley Act. While its a handy whipping boy, overall the law has had important positive effects. It may fairly be credited with correcting the most serious problems that beset our markets just a few years ago. It has played a significant and valuable role in restoring integrity to our markets. Remember where we were, and what happened. We needed decisive action. Sarbanes-Oxley delivered.Cox’s comments are in contrast to others like Barney Frank, chair of the House financial services committee. Frank strongly supports the chamber’s recommendations. Frank also supports an easing the requirements of Section 404.It looks like we’re in for some heated debate on this issue, although right now, Cox’s opinions might be in the minority.
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