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Washington, D.C., July 30, 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 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.
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.