April 04, 2006
Take the Public's Money and You'll Have to Pay a Price
The previous blog entry dealt with recent comments from SEC Chairman COX (see below).
It seems that the SEC Chairman and others are pushing back on relaxing/neutering the 404 provisions as they apply to smaller companies. Why is this given all the pressure to eliminate 404 for smaller companies because it is costly and onerous? Perhaps it is because they are worried about creating a small cap compliance ghetto where the perceived risk (and cost of capital) is increased relative to today's market. Maybe they want the U.S. markets to continue to maintain the highest standards relative to foreign markets, and avoid the "race for the bottom" with respect to investment standards that is occurring on other markets. Or, perhaps it is because they know that smaller companies have significant existing challenges with respect to improving internal controls over financial reporting and there is no point in delaying the need to improve financial "hygiene" for this segment of issuers. If you take the public's money you are going to have to pay the price.
It seems that the SEC Chairman and others are pushing back on relaxing/neutering the 404 provisions as they apply to smaller companies. Why is this given all the pressure to eliminate 404 for smaller companies because it is costly and onerous? Perhaps it is because they are worried about creating a small cap compliance ghetto where the perceived risk (and cost of capital) is increased relative to today's market. Maybe they want the U.S. markets to continue to maintain the highest standards relative to foreign markets, and avoid the "race for the bottom" with respect to investment standards that is occurring on other markets. Or, perhaps it is because they know that smaller companies have significant existing challenges with respect to improving internal controls over financial reporting and there is no point in delaying the need to improve financial "hygiene" for this segment of issuers. If you take the public's money you are going to have to pay the price.
