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Washington, D.C., June 7, 2007—Sarbanes-Oxley, the federal law aimed at protecting investors from corporate abuses, is actually hurting investors by preventing them from growing wealth, according to a new study by the Competitive Enterprise Institute.
"Enacted after major corporate scandals, the law increases penalties for fraud, but it also contains many mandates that unduly restrict legitimate entrepreneurs," writes the study’s author, John Berlau, the director of CEI’s Center for Entrepreneurship.
But the costs of the 2002 law affect investors, too, warns the study. If "companies do not have the same access to the markets that Wal-Mart and Home Depot did in their early years," investors "do not have the same opportunity to build wealth with them." Berlau notes that since "emerging growth companies [are] an important part of diversified portfolios," Sarbanes-Oxley’s barriers to firms going and staying public could have negative effects on the portfolios of the retiring Baby Boom generation.
The report, SOXing It to the Little Guy: How Sarbanes-Oxley Hurts Small Investors and Entrepreneurs, identifies major flaws in the law, showing it can’t be merely "tweaked." These include:
Other critics of the current regulatory climate have included House Democratic Leader Nancy Pelosi, Home Depot co-founder Bernie Marcus, and Motley Fool investing columnist Bill Mann.
Berlau calls for a thorough overhaul of the law. He proposes an alternative stock venue free of Sarbanes-Oxley and other SEC requirements, in which fraud would still be punished, but "investors would be able to choose how many preexisting rules are necessary."
Read the study. 
Read other publications by John Berlau and the Center for Entrepreneurship.