Chairman Cox: Supporting SOX 404

From AAO Weblog

Yesterday, SEC Chairman Christopher Cox spoke before the U.S. Chamber of Commerce’s First Annual Capital Markets Summit, and delivered surprising support for the Sarbanes-Oxley Act.

Cox’s appearance was well-timed given that the Chamber just last week had issued its report and recommendations on “Regulation of U.S. Capital Markets in the 21st Century.” That report was critical of Section 404 and the SEC’s oversight.

Said Chairman Cox:

“Yours is not the first, nor will it be the last, outside group to tell us that there are significant direct and indirect costs that come along with the benefits of Sarbanes-Oxley. The SEC’s own analyses of Section 404 of Sarbanes-Oxley are in general agreement with what the Government Accountability Office, the Schumer-Bloomberg report, the Hubbard-Thornton report from the Committee on Capital Markets Regulation, and your own Commission have found: that while a portion of the first-year compliance experience of Sarbanes-Oxley undoubtedly reflected start-up costs — and, in many cases, long-neglected maintenance by companies of their internal control systems and procedures — it is undeniable that much of the cost was attributable to excessive, duplicative, or misdirected efforts.

As your report noted, we’re working to eliminate the unnecessary costs of 404 compliance. We are serious about it, and so is the PCAOB.

That said, it is wrong to conflate the implementation problems of 404 with the entirety of the Sarbanes-Oxley Act. While it’s a handy whipping boy, overall the law has had important positive effects. It may fairly be credited with correcting the most serious problems that beset our markets just a few years ago. It has played a significant and valuable role in restoring integrity to our markets. Remember where we were, and what happened. We needed decisive action. Sarbanes-Oxley delivered.”

Spirited stuff, and he got it right. Worth checking out the whole speech here.

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