Charles Schumer and Michael Bloomberg, in addition to their other many duties, have prepared a report on the future of New York as a financial center. One of the main thrusts of the report is an attack on the Sarbanes Oxley law, legislated in 2002 as a political response to the Enron and Worldcom scandals/crises. This law increases the costs of listing on a U.S. exchange greatly, both in terms of auditing and in terms of potential liability. At the same time, other financial centers around the world provide liquidity that is competitive with the U.S. The Sarbanes Oxley law may indeed be worthy of review, as Schumer/Bloomberg argue. But this report raises the broader question of whether this type of competition for business--a very stark competition of immobile factors for mobile ones--might put pressure on good regulation. If it does, the next step to consider is how to coordinate among regulators--to create a regulatory cartel-in order to reduce regulatory competition.
On a slightly different note, the Sarbanes Oxley law has been attacked as being "extraterritorial" in that it is intended to apply to foreign companies listed on U.S. exchanges (what's extraterritorial about that?), and in that it regulates the types of auditors that may be hired to check compliance with the "internal controls" requirements of its Section 404. As of July 15, foreign companies having market valuation exceeding $75 million and listing on a major U.S. stock exchange became subject to Sarbanes-Oxley Act.
