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December 06, 2011

Finally, Europe may embrace audit reform: Sarbanes-Oxley Lite.

Nearly 10 years after enactment of the American Sarbanes-Oxley Act (also known as "the Public Company Accounting Reform and Investor Protection Act"), and just as many years of hearing Europe-based lawyers and their clients complain about it, Europe may get its own legislation: a kind of Sarbanes-Oxley Lite, proposed last week by the European Commission. If passed, the legislation would require more stringent but not draconian oversight of the auditing profession in the European Union. See for details this one at Broc Romanek's TheCorporateCounsel.net


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Posted by Holden Oliver (Kitzbühel Desk) at December 6, 2011 10:31 AM

Comments

AAAAAAAAAAAAAAAAAhahahahahahahahahahahahahahaha, oh, oh that's great, that has tickled me.

London screams bluddy blue murder and literally throws a tantrum when the Chancellor puts up the bank levy (bank tax to compensate for all that free money the taxpayer handed them when they all ran out of money) up by 0.01%, ignoring of course the 2% drop in corporation tax that they will benefit from, but people actually think it will not duck regulations that hurt New York, Frankfurt and Paris.

I see a "we'll agree your Euro Bailout treaty if we can opt out of this" moment peeking over the horizon.

Posted by: Duncan King at December 6, 2011 04:45 PM

Misery loves company. SOX has killed off the underwriting market in the US and destroyed the venture capital industry. Why would the Europeans want to follow our stupidity? All the Republican presidential candidates have pledged to kill SOX.

Posted by: Dale Halling at December 6, 2011 05:53 PM

In short, I think some type of SOX-type legislation is needed in jurisdictions covering most Western markets. (In Eastern and Greater China markets, it would just become a joke on enforcement; so forget it.)

Problem is: the design is always bad.

Posted by: Holden Oliver (Kitzbühel Desk) at December 6, 2011 06:37 PM

Dale Halling "claims," according to his blog and post, that SOX has killed off the underwriting market in the US and destroyed the venture capital industry, but he never provides support.

Oddly, I have not meet a single investor who claims they get enough true and accurate information about companies in which they might have an interest.

However, I have run into more than one broker who tells me the problem is lack of confidence. It is a mystery to me how reducing transparency and information, and increasing the fog around investments, will lead to more confidence and investment.

Respectfully, I would suggest the we need greater transparency and more accountability than ever before.

In 1995, the SCOTUS made it legal for lawyers like Dale to advise clients about how to commit securities fraud. Within a dozen years we had the greatest financial collapse in history. There is outstanding academic work that it was all fraud, trillions in crappy securities.

Today, I saw a few minutes of a hearing on CSPAN about the problems in Europe, where the banks still hold north of %500 billions in what the witnesses said were worthless Mortgage backed securities. SOX our problem. I don't think so. I think it was the junk sold, that got past SOX.

Having almost started a venture fund, I wholly fail to see the significance of SOX. While venture capital investing sounds very exciting, the reality is that the sole driver is luck. The window for IPOs has to be open when the invested in firm is ready for that transition.

The reality is that our economy was sick long before 2007/08 (read Stiglitz, Vanity Fair and elswhere) and the IPO window is hard to hit.

The best available explanation for why VC has lost its luster may be that the Bush tax cuts convinced investors to take their money and run, by reason of fiscal adjustment cost discounting. Smart investers could see that the Bush tax cuts would destroy our finances and they left town. The proof can be found in the charts showing capital investment as a % of GDP. The line has been pointed down since RR started cutting taxes in the 1980s

In sum, truth like art is in the eye of the beholder. Being concurrent does show causation. If it did, they I could "claim," that Bush's tax cuts shut down the VC and IPO world. I make no such "claim." I merely say that better arguments exist that that it was the tax cuts that are causing problems, not SOX

Posted by: Moe Levine at December 15, 2011 11:52 PM

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