Thursday, November 30, 2006

Market Overhaul Proposal Draws Criticism

From NYT's Deal Book:

Depending on whom you ask, a panel’s sweeping proposal to revamp securities rules goes too far, or not far enough. The panel, formed with the endorsement of Treasury Secretary Henry Paulson, issued a report Thursday that recommended making it harder for companies to be indicted or sued and seeking to limit rules that impose high costs on business, among other changes. The Council of Institutional Investors, a corporate governance group, responded Thursday by saying that the recommendations “would undermine the effectiveness of market watchdogs and weaken critical investor protections.” The National Venture Capital Association had a very different take.
The venture association, which represents firms that invest in start-up companies, suggested the committee’s proposal did not give enough relief to small businesses. It called the report a “step backwards based on work and recommendations that have already been put forth.”
The opposing views reflect the growing debate over whether the Sarbanes-Oxley Act of 2002, passed after the collapses of Enron and WorldCom, has made the U.S. a less-hospitable place for business, a safer place for investors, or some combination of the two.
The panel, called the called the Committee on Capital Markets Regulation, is co-chaired by R. Glenn Hubbard, the dean of the Columbia University Graduate School of Business, and John L. Thornton, the chairman of the Brookings Institution. It has no official standing, but its recommendations are likely to help set the agenda at the Bush administration.
The report spends a lot of time describing what it considers to be the flight of initial public offerings to markets outside the U.S., a trend it suggests is driven by the additional red tape and costs of a U.S. listing. The Council of Institutional Investors, a nonprofit group of pension funds, called this analysis “off-base.” In a statement released Thursday, the council argued that the nation’s declining I.P.O. share reflects increased globalization, higher investment banking fees in the U.S. and the privatizations of many state-owned companies overseas.
The National Venture Capital Association issued its own statement, in which it criticized the report for failing to recommend more measures to shield small businesses from Sarbanes-Oxley. It argued that the scope of small businesses that would be granted relief is “much narrower” than a proposal recently put forth by a committee of the Securities and Exchange Commission.
Go to Press Release from the Council of Institutional Investors »
Go to Press Release from the National Venture Capital Association »

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