Eliot Spitzer Teaches the Lessons of Integrity

Friday, December 8, 2006
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Mr. Eliot Spitzer, every free man’s most hated prosecutor, has spoken out against the possibility of revamping the Sarbanes-Oxley regulations that are strangling business in America. In the world according to Spitzer, the current regulatory environment may need some ‘tinkering,” though, he says, it is not legion of rules or massive compliance costs that are causing business to lose its competitive edge. It is just stupid people with bad usiness models. This follows closely on the heels of Treasury Secretary Hank Paulson and Nancy Pelosi whispering in the wind about a possible relaxation of the monstrous Sarbanes-Oxley 404 rules, along with myriad other capital market regulations.

In the same vein, the SEC is opening a small escape hatch for foreign companies that want to delist from a US stock exchange. Foreign companies with 300+ US shareholders have been held hostage on US exchanges by SEC rules. They can delist, however, they are still subject to SEC rules – and that means Sarbanes-Oxley. Under the revamped rule, the 300-shareholder hogtie will be tossed, and instead, loyalty to SEC rules will be based on trading volume. This will allow some foreign companies to skinny their way outta here.

Foreign companies had listed on US exchanges in order to increase and broaden the shareholder base, but now, the benefit of being listed here no longer exists. And why might that be? Sarbanes-Oxley, of course. But Mr. Spitzer reminds us that this kind of strangulation and manipulation is “integrity.”

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