Sarbanes-Oxley Fifth Anniversary Marked by Problems

Washington, D.C., July 25, 2007 Tuesday,— July 31st is the fifth anniversary of President Bush's signing of the Sarbanes-Oxley bill aimed at protecting investors from corporate abuses. Unfortunately, the law has resulted in harm to investors, preventing them from growing wealth.

A recent report by the Competitive Enterprise Institute, SOXing It to the Little Guy: How Sarbanes-Oxley Hurts Small Investors and Entrepreneurs, identifies major flaws in the law and explains why the law must be overhauled completely. Among the problems with Sarbanes-Oxley identified in the report:

• Section 404, the law’s most costly provision. "Section 404 forces auditors and executives to sign off not only on the accuracy of a company’s financial statements, but also on its ‘internal controls,’ a vague term which the law does not define," Berlau explains.
• Section 301 is another problem. It "mandates the one-size-fits-all requirements that only ‘independent’ directors sit on companies’ audit committees, intruding on the cohesiveness and efficiency of different types of boards."
• Section 201 "prohibits a company’s auditor from performing any other services for the firm,” a prohibition which has “caused costly duplication of many accounting tasks."

The author, John Berlau, Director of CEI’s Center for Entrepreneurship, proposes an alternative stock venue that is free of Sarbanes-Oxley and other SEC requirements, in which fraud would still be punished but investors could choose how many preexisting rules are necessary.

• Read the report: SOXing It to the Little Guy: How Sarbanes-Oxley Hurts Small Investors and Entrepreneurs [2] by John Berlau
• Read other publications by John Berlau and the Center for Entrepreneurship. [3]
• Contact John Berlau [4]