April 12, 2006
Is SOX driving away North American IPOs?
If you listened in today on the SEC Small Business Advisory Committee's final review of its upcoming recommendations with respect to SOX 404, capital formation, etc, you would have heard much comment about how IPOs in the U.S. market are drying up primarily because of the cost of Sarbanes-Oxley.
Let's face it. The U.S. market has the world's highest investment standards and equity volumes. Marginal companies may be encouraged to begin their "public journey" elsewhere because of the attractiveness of "flexible regulatory regimes" ( What does that mean?! Gumby does Compliance! Next it will be optional compliance). In any event, the good companies all want to enjoy U.S. market valuations and trading coverage. The issues before the SEC and the Small Business Advisory are ones of standards and cost-effective implementation of those standards. The investing public is not well served by lowering the standards, nor are the companies themselves as their long-term cost of capital will increase. Effective compliance is good for business long term - just like good hygiene is important for public health.
Let's face it. The U.S. market has the world's highest investment standards and equity volumes. Marginal companies may be encouraged to begin their "public journey" elsewhere because of the attractiveness of "flexible regulatory regimes" ( What does that mean?! Gumby does Compliance! Next it will be optional compliance). In any event, the good companies all want to enjoy U.S. market valuations and trading coverage. The issues before the SEC and the Small Business Advisory are ones of standards and cost-effective implementation of those standards. The investing public is not well served by lowering the standards, nor are the companies themselves as their long-term cost of capital will increase. Effective compliance is good for business long term - just like good hygiene is important for public health.
