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Repeal of Financial Reform?


Repeal of Financial Reform?

Michele Bachmann has introduced a bill repeal the massive and widely criticized Dodd-Frank financial (see Newsmax story and Stillwater Gazette story).  This is a good first step, but she should have also included the repeal of Sarbanes Oxley.  Ms. Bachmann has correctly criticized SOX as ineffective and overly expensive.

When Sarbanes Oxley was passed, the SEC (Securities and Exchange Commission) estimated the cost of compliance would be $91,000.00 per year for each public company.  The most recent estimates for the cost of compliance are between $4.0 million and $5.0 million per year for publicly traded companies.  This clearly has an affect on the number of IPOs.

Is the cost of this law worth its incredible price? Has Sarbanes Oxley achieved its goal of protecting investors from fraud?  Sarbanes Oxley has cost the U.S. economy at least $400 billion since it passage.  This is just the direct costs and does not include the opportunity costs, which are most likely substantially higher.  The stock market has been flat or declining since its passage.  As a result, it is hard to argue that this legislation increased shareholder value.  The banking scandals of 2008 & 2009 that included Bear Sterns, Lehman Brothers, American International Group (AIG), Merrill Lynch, and the Bernie Madoff fraud make it impossible to suggest that Sarbanes Oxley has protected investors from fraud.

 



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