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Thinking Outside the Sarbox

Thinking Outside the Sarbox

by Rick Turoczy on September 25, 2006

Mr. Hubbard’s panel is noteworthy mainly for the breadth of its investigating. To be sure, the committee will tackle the post-Enron Sarbanes-Oxley law, and especially Section 404 of “Sarbox,” which sets onerous new requirements for internal controls that are strangling many small companies. But the scholars and businessmen will do so much more. The barriers to American competitiveness extend beyond Sarbox, Mr. Scott is at pains to tell us.

Securities class-action reform is toward the top of the list. Twice in the 1990s, Congress flirted with reform in this field although each effort ultimately fell short. While the demise of perennial class-action plaintiffs’ firm Milberg Weiss appears to be putting a dent in new litigation, America is still competing against countries like Britain and Australia that offer more protections. A London-based company operates in a loser-pays system where plaintiffs have to shoulder the company’s legal costs if a suit is unsuccessful; the system is a natural deterrent to frivolous litigation. In Australia, the lead plaintiffs and their lawyers in a class action face a similar threat if they lose.

Thinking Outside the Sarbox

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