Bipartisan Support in New York for SOX 404 Reform
Governor Eliot Spitzer, the Democratic governor of New York who as the state’s attorney general prosecuted Wall Street firms and other companies for corporate securities fraud and earned more than $3.5 billion in penalties and settlements for the state, according to the New York Post, has joined Republican Mayor Michael Bloomberg and Democratic Senator Charles Schumer in calling for reform of the Sarbanes-Oxley Act.
At a news conference in New York the three men announced support for reforms recommended in a study report released by McKinsey & Co. that was commissioned by Bloomberg and Schumer. The study warned that New York could lose its position in the financial marketplace in a decade and urged lawmakers and regulators to ease federal accounting rules and ensure that lawsuits against financial services firms have legitimate grounds.
The McKinsey study, “Sustaining New York’s and the US’ Global Financial Services Leadership,” reflects the same conclusions drawn by a study by the Committee on Capital Markets Regulation published a year ago.
“America has undermined its own global competitiveness,” Bloomberg told reporters at City Hall where he stood with Schumer and Spitzer, MarketWatch.com says.
“We must take these recommendations seriously so as to support an economic climate ripe for financial services while continuing efforts to safeguard the market for investors,” Spitzer said, according to the New York Post.
Schumer said that his first strategy in reforming the Sarbanes-Oxley Act would be to push for changes at the administrative level with the Securities and Exchange Commission, rather than drafting a new law, Market Watch reports. He added that both Christopher Cox, chairman of the Securities and Exchange Commission, and U.S. Treasury Secretary Henry Paulson have seen the McKinsey study and support it.
The reforms called for by the McKinsey report, include among others, pointoflaw.com says,
- Limit the liability of foreign companies with U.S. listings to damages that are proportional to their degree of exposure to the U.S. markets;
- A cap on auditors’ liability;
- Easing Sarbanes-Oxley regulation;
- Arbitration as an alternative dispute resolution system for securities grievances;
- Limits on punitive damages; and
- Interlocutory appeals in federal securities actions.”
In 2006, the New York Times reports, exchanges in both Hong Kong and London raised more money than New York, and the decline in New York’s market share has been steep over a five-year period. New York raised 54 percent less than it did in 2000, London raised 303 percent more and Hong Kong 225 percent more.
Senator Schumer welcomed Spitzer’s support, saying there “couldn’t be a better advocate,” the Post reports. “It shows we are very balanced in our approach,” he said.