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Standards & Guidance

Call for US Securities and Exchange Commission to shift its focus

Christopher Cox, chairman of the US Securities and Exchange Commission (SEC), has voiced his opposition to the recommendations of a US advisory group, established by the US Chamber of Commerce last year.

The commission on the regulation of US capital markets has suggested that the Sarbanes-Oxley (SOX) regulations should be made part of the Securities Exchange Act of 1934 which it says would give companies more flexibility when implementing SOX. The group indicates that this is necessary because SOX is not fully subject to the SEC’s general powers to issue rules and exemptions for the implementation of federal securities laws

Speaking at a summit to discuss the recommendations, Cox said the SEC had the power and the necessary flexibility to implement the law in a way that makes sense for investors and markets. While he admitted that implementation of section 404 of SOX covering internal control had proved burdensome the SEC had worked to address this and smaller companies and non-US filers did not yet have to comply with the regulations.
 

The group also recommended that the federal government modernise its regulatory approach to financial markets; companies should be encouraged to stop issuing quarterly earnings guidance and called on policy-makers to address the challenges which it claimed faced the public company audit profession.

Specifically the group believes that the SEC needs restructuring so it more closely matches the current capital markets and it believes the SEC should adopt a more prudential regulatory role by providing informal advice on issues that do not require rules. In this way the group believes there will be better engagement between the regulator and the financial institutions it regulates.

In an earlier speech in London, SEC Commissioner Roel Campos, also defended section 404 and argued that regulators around the world had also recognised the importance of internal controls and adopted their own rules requiring management assessment of them.

He also disputed the findings of reports that have suggested that US capital markets are over-regulated. He said that promoting a market as being "light touch" in respect of its listing standards was likely to ultimately drive capital away. US capital markets remained strong because investors did have confidence that their capital was protected, Campos said.

Links

US Securities and Exchange Commission

US Chamber of Commerce

Commission on the Regulation of US Capital Markets

Christopher Cox Speech

Roel Campos Speech

April, 2007

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