WASHINGTON, D.C.—Benjamin Schiffrin, Better Markets’ Director of Securities Policy, issued the following statement in connection with Better Markets’ new Fact Sheet, “The Cost of Noncompliance with Financial Regulation”:
“Almost 25 years ago, the collapse of Enron and WorldCom in a series of accounting scandals rocked the economy. Those scandals cost investors billions of dollars and wiped out hundreds of thousands of jobs. As our new Better Markets fact sheet shows, one estimate put the total cost to the economy at $35 billion off of Gross Domestic Product. The scandals were so destructive that they spurred a bipartisan legislative response—the Sarbanes-Oxley Act (SOX). SOX has been largely successful at preventing recurrence of such scandals. Yet the zeal for deregulation now consuming Washington has led to calls for scaling it back.
“Tomorrow, Congress will hold a hearing about the costs of complying with SOX. The hearing presages calls to roll back some of SOX’s provisions. But it’s worth remembering why we passed SOX in the first place, and the potential consequences of returning to a pre-SOX world where financial misconduct was allowed to flourish. SOX created the Public Company Accounting Oversight Board and charged it with exercising independent oversight of public accounting firms, established new standards intended to preserve auditor independence and prevent related conflicts of interest, and required that senior executive officers certify the accuracy of their company’s financial statements. It’s hard to believe that Congress would want to focus on the cost of these provisions rather than the benefits to the American public of redressing the conditions that allowed Enron and WorldCom to occur.
“Preventing companies from cooking their books and lying about their finances requires the investment of significant resources. The payoff to these investments is greater economic and fiscal stability. If we retreat from the protections SOX introduced, we will invite a return to the climate that allowed Enron and WorldCom to transpire.”
The fact sheet is available online here.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
