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It is not surprising for regulators to seize upon business failures to argue for more regulation, touting regulations alleged benefits while minimizing its downside. But it is disappointing when talented individuals like former Federal Reserve Chairman Paul Volcker and former Securities and Exchange Commission Chairman Arthur Levitt Jr. fall into this mindset (“In Defense of Sarbanes-Oxley,” editorial page, June 14).
Enron, WorldCom and other recent corporate scandals required a thoughtful response. Sarbanes-Oxley was not that response. The question is not whether to regulate, but who should regulate for whom?
Regulated industries experienced failures, so many saw more SEC regulation as the solution. In rushing Sarbanes-Oxley to passage, Congress failed to consider whether competition might regulate companies’ behavior better than the SEC, or whether existing policies—such as insider trading rules or corporate take over restrictions—weakened competitive regulatory forces.
Sarbanes-Oxley requires more reporting of data, more quantification of intangibles, and more micro-rules for governing the increasingly nominally private firm—with an inordinate faith in accounting. For example, it requires firms to submit tot he SEC the value of any options granted. The SEC has no idea how such values should be quantified, but the law mandates it anyway—the firm will be notified at an appropriate time whether it has violated the rules.
More data does not necessarily mean more useful information. The SEC already requires firms to stuff mailboxes with unwanted offers, privacy notices and other data, to the point for useful information is crowded out.
More laws and regulations do not inspire more trust. How much “trust” had FDA regulation given the pharmaceutical industry?