Republicans Say Retail Investors Are Missing Out on the ‘Lottery Tickets’ of Private Firms Going Public

MarketWatch covers the congressional testimony of John Belau on the Sarbanes-Oxley Act of 2002.

Congressional Republicans believe the cost of going public, and being a public company, is too darn high. That means retail investors are missing out on huge gains, since private company “unicorns” are avoiding public markets and the “unnecessary regulatory burdens” imposed by the 2002 Sarbanes-Oxley Act.

In a hearing on Tuesday of the House Financial Services subcommittee on capital markets, Rep. Warren Davidson, a Republican from Ohio, compared the stock market to buying a ticket to the lottery. “We don’t stop people from spending money on lottery tickets and clearly the risk of losing your capital in the lottery is much greater.”

Rep. Bill Huizenga of Michigan, the subcommittee chairman led the full court press on his fellow lawmakers, and regulators like the Securities and Exchange Commission and the Public Company Accounting Oversight Board—created by Sarbanes-Oxley—to expand investing options for mom and pop investors and remove more obstacles to more capital formation.

“Sarbox, or just simply SOX as the law is colloquially known,” said witness John Berlau, a fellow at the conservative Competitive Enterprise Institute and a contributor to Newsmax, “has caused auditing costs to double, triple, and even quadruple for many firms.” Section 404 of the law requires an auditor to give an opinion on management’s assessment of its internal controls over financial reporting has been interpreted too broadly by interpreted broadly by the PCAOB, according to its critics.

Read the full article on MarketWatch.