Monday, March 26, 2007

Overzealous regulators

Aah! What a difference five years of hindsight and a loss in US market competitiveness as a result of overzealous regulation can make. Most of us have been following the recent backlash against Sarbanes-Oxley (SOX), particularly Section 404 of the act, which requires companies to certify and assess the effectiveness of its financial controls.

Whilst the SEC has not totally repealed the controversial act, in light of a marked decline in companies looking to list in the US, which a number attribute to the onerous task of having to comply with regulations such as SOX, it has announced amendments to the controversial SOX legislation.

Yet, the greatest moment of clarity regarding SOX has to be a recent comment made by House Financial Services Committee chairman Barney Frank at a Council for Institutional Investors' meeting in the US last week. According to an article in the Investment News, Frank, alluding to the over enthusiasm of accountants drafting the SOX act stated:

"The accountants probably, in helping draft 404 regulations, overdid it a little bit, and we violated a very important principle: Never ask your barber if you need a haircut."

Perhaps other overzealous regulators should heed Frank's pertinent remarks.

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