The Scourge

IBD has a great article on the implications of Sarbanes-Oxley for non-wealthy investors. It is the non-currently wealthy individuals who are less to become wealthy cause they are going to miss out on some of the early growth phase of companies.

Imagine you had a time machine and could go on a stock-buying spree 25 years ago. Yet you didn't bring that much cash on board.

You could do pretty well investing in the growing firms of Wal-Mart Stores or Apple. But you'd make a killing on this retailer that had just recently gone public with only four stores to its name. Buying 100 shares of Home Depot in 1982 would yield you $1.6 million by 2002.

But time travelers coming back to 2007, even with a fistful of stock market data, probably won't be so lucky. Neither will today's savvy investors who study past trends in publications such as Investor's Business Daily. This is because a law sold as protecting investors from fraud is actually hurting investors' ability to grow wealthy with legitimate firms.

As a U.S. Chamber of Commerce task force this week unveils recommendations for lightening the burdens of the Sarbanes-Oxley Act of 2002, expect the media to paint the issue as business vs. shareholders.

The truth, however, is that average investors have been some of this law's biggest victims.

Rushed through Congress after the Enron and WorldCom scandals, Sarb-Ox ended up imposing many mandates that greatly encumber honest entrepreneurs. Home Depot co-founder Bernie Marcus recently told IBD that his company could not have gone public as a four-store firm "in today's legal and regulatory climate."

This means that Home Depot's early investors would also have lost out if Sarb-Ox had been in place.


Powered by Movable Type 5.02

About this Entry

This page contains a single entry by Bob published on March 15, 2007 2:10 AM.

Stability was the previous entry in this blog.

LOL is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.