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Thursday, April 13, 2006

Greenspan predicts US governance revamp


I posted about this before.

In a global economy, it is imperative that capital market regulators take into account the ease with which capital can flow from one region to another. Sarbanes-Oxley is an perfect example of a lack of the global perspective by regulators. What started as a good idea in the wake of the Enron scandal, may prove to be extremely problematic for US investors.

Although the basis of the law was a definite advance in terms of governance, it is possible that some parts of Sarbanes-Oxley has created too many burdens for business; especially the provision that forces companies to have their internal controls certified by auditors.


From the Financial Times:

Alan Greenspan, former chairman of the US Federal Reserve, predicted yesterday the US would make "changes" to the burdensome financial and corporate governance requirements driving companies out of US markets.

Mr Greenspan initially supported the passage of the Sarbanes-Oxley law - the landmark 2002 legislation introduced after the Enron and WorldCom scandals - but said yesterday he was "disturbed" when companies started favouring London over New York for their flotations.

"The Sarbanes-Oxley Act has created significant problems for foreign investors with its regulatory structure," he said at a question and answer session at the Asian Financial Centres conference ..."I am nevertheless acutely aware and disturbed by the fact that initial public offerings have moved away from the US - and to a large extent have moved to London."

"My impression is that there will be changes," said Mr Greenspan. But in Washington it is far from clear what could be done about the law...

Also at the Asian Financial Centres conference with Mr. Greenspan was former New York mayor Rudy Giuliani, who said he thought that London and Tokyo would eventually adopt similarly tough regulations. A question I would pose is when and just how much damage to the US capital markets would be done in the interim.

Posted by Trade Monkey :: 12:10 PM :: 0 comments Perma-Link

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