Sarbanes-Oxley's unintended results.I read with interest your September column, "Widening the Gap: Big GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). vs. Little GAAP" (President's Page), since it supports similar concepts that I have advocated in advancing the need for an Entrepreneurial Exchange for small-to-medium enterprises (SMEs). Not only do higher imbedded compliance costs from Sarbanes-Oxley-type (SOX) regulation marginalize mar·gin·al·ize tr.v. mar·gin·al·ized, mar·gin·al·iz·ing, mar·gin·al·iz·es To relegate or confine to a lower or outer limit or edge, as of social standing. SMEs and immobilize/ration capital, but an equally troublesome by product is that SOX tortures disclosure to require predictions from firms that lack positive cash flow and stable product demand. You cannot govern "risk" and "uncertainty" under a one-size-fits-all regulatory regime. Conflating "risk" with "uncertainty" produces the unintended consequences of contingent and unforeseeable Un`fore`see´a`ble a. 1. Incapable of being foreseen. Adj. 1. unforeseeable - incapable of being anticipated; "unforeseeable consequences" unpredictable - not capable of being foretold liabilities for market practitioners. Holding market participants who deal in uncertain investments to the condition of predictability conveys regulatory rights without attendant regulatory responsibilities. Imposing commands to attain predictive capability on capital markets characterized by "uncertainty" undermines market resiliency and increases the probability of systemic failure. Regulating a market characterized by "uncertainty" as though it were deterministic imposes sanctions on unforeseeable events that stifle free market innovation and adaptability. It's ironic that having demonstrated the virtues of the capitalistic cap·i·tal·is·tic adj. 1. Of or relating to capitalism or capitalists. 2. Favoring or practicing capitalism: a capitalistic country. system, American policy makers are now trying to recreate the governance regime of the Napoleonic Code Napoleonic Code French Code Civil French civil code enacted by Napoleon in 1804. It clarified and made uniform the private law of France and followed Roman law in being divided into three books: the law of persons, things, and modes of acquiring ownership of that our ancestors fled. SOX-type regulation is a large operational tax on job creation that gives rise to unintended consequences. The more top-tier regulatory commands strive for predictive capability, the more imprecise the management of micro-cap commercial activity, due to transactional transference TRANSFERENCE, Scotch law. The name of an action by which a suit, which was pending at the time the parties died, is transferred from the deceased to his representatives, in the same condition in which it stood formerly. to economic externalities externalities side-effects, either harmful or beneficial, borne by those not directly involved in the production of a commodity. . The more commands add costs to the micro-cap market, the greater the incentive to go underground and/or offshore to conduct business. This, in turn, causes the U.S. micro-cap market to become less transparent, less innovative and less productive. Stephen A. Boyko, President Global Market Thoughtware Inc. Bethesda, Md. |
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion