Categories:United States

Wall St crisis? Blame SarBox

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  • SOX

    Sarbox is better know in the financial world as SOX. The regulations for these have been relaxed somewhat over the last 2 years, but regardless, all of the documented processes needed to comply with these regulations are not "new" requirements. They are rules that should have always been followed by any good financially minded company. The burden of SOX comes in the formal documentation adn regular testing of the newly required regulations.

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  • Oh please!

    Spoken like someone that does not have ANY clue of what is happening. SarBox did not have, does not have or will not have any impact on the goings on of Wall Street. Wall Street's woes can be traced directly to the repeal of the Steel-Steagall Act in 1999 (yes this a REPEAL of regulation). Without this law, the line between commercial and investment banking was abolished and fiascoes that we are now experienced were allowed to happen. What next, SarBox causes AIDS????

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  • Good article.

    timely opinion from a legal view.

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  • Wall St. Crisis

    John, I hope you send your article to all of the brilliant minds we have in the financial community, our current administration and by the way our presidential candidates. I am certain it would open many eyes. It certainly opened mine.
    Thank you.

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  • International Presence

    Sarbox may have reduced listings in the US (helping London become the pre-eminent financial centre), however the investment banks long ago realised that they could make money on listings elsewhere, that is one reason why they have/had a global presence - including in particular in London (Lehman's £8bn in revenue just before insolvency sent to the US!?).

    Please check on what proportion of those 1739 listings one of the five main US Investment banks acted as bookrunner/advisor. Then provide your comments. I think we will see it was not necessarily Sarbox that caused the problem.

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  • Enlighting

    I have learned more about the issue now, Thank you for your enlightening article.

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  • Excellent Article

    Brilliand and insightful article, great analysis and the author is not afraid to tell the world and our leaders the truth behind this fiasco. I wish the author was running for public office.

    I noticed that the one vulgar person who disagreed with the article was so uneducated and ignorant that he didn't even know the name of the Glass-Steagall Act he attempted to discuss (he called it Steel-Steagal), clearly his lack of understanding and knowledge doesn't stop at not knowing the name.

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  • Excellent Article

    Excellent article, it is so true. I'm a lawyer in Beijing and there are so many Chinese enterprises that want to list their IPO’s in the US rather than in London or Hong Kong, but end up choosing another location because of Sarbox. For example, one of the largest software companies in China last year canceled their planned listing at NASDAQ as a result of Sarbox.

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  • Fantastic Article - Editor please forward to our leaders

    John Maalouf and Alan Greenspan are two of the only people who appear to have an understanding of this financial crisis. Fantastic article, please forward this to our leaders and presidential candidates.

    I noted that one earlier commentator is under the mistaken impression that the U.S. investment banks such as Lehman that have offices in the U.K. made profits regardless of where the IPO’s were taking place, that is mostly incorrect. When the IPO’s left the U.S., after Sarbox (or SOX as some non-financial people like to call it) came into effect, many of the U.S. investment banks tried to follow, however they were for the most part unsuccessful.

    The analogy would be losing $100 but finding a quarter, they made a very small amount of money overseas and John is right, they lost billions every year. This is why Morgan Stanley and Goldman are converting to commercial banks, in order to generate a new safe and steady stream of income to replace the lost IPO fee income.

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  • Crisis isn't about IPOs

    This isn't about SarBox, it's about sub-prime mortgages and derivatives. Lenders lent to people they shouldn't, then no-one understood where the losses were going to end up. Where IPOs take place is small beer in comparison.

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  • Extremely Insightful Look At Wall Street Crisis

    Superb article, an extremely insightful look into the crisis plaguing Wall Street. Mr. Maalouf is exactly right, without the IPO revenue, which the investment banks were deprived of by Sarbox, Wall Street could not afford the losses from the risky investments in the subprime mortgage sector.

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  • excellent article

    Sarbox is the greatest single threat to the U.S. financial services industry, what we need is to repeal this poorly thought out piece of legislation which only hinders the finance sector from acting efficiently, excellent article.

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  • NFA does it again now for Forex

    We haven't learned our lesson. This week the NFA and congress regulators fired anther dart into a much less known industry but as damaging will be the result. Brokers aka FDM's in foreign exchange "FX" until a year ago could participate as market makers with as little as 1mm. Now the industry has decided in the name of regulation and for the good of the people it should be 20mm. I have been in the industry now for 10 years and know many many brokers that will simply leave the country looking for a more capitalist society. If you don't think this matters you should know that the industry is about 60 billion a day in trade volume. All going off shore now!

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  • What?

    Sarbox did about as much to "cause" this crash as weak breaks would in a car driven by a drunk.

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  • The regulators never learn

    Exactly right, the regulators never learn. They keep over regulating the market and fail to see the negative ramificartions of their actions.

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  • Really!!!

    It is a sad fact that business does not like being monitored but really needs it. SOX benefitted those businesses who complied because it exposed areas where controls were deficient.

    The IPO's that failed to materialise obviously did not want these deficiencies exposed. Also, it is not only the American banks that are suffering now. Where are the foreign bank profit cusions they got from the IPO's America missed out on?

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  • Sarbox is responsible for the decline in the IPO market

    Sarbox is one of the greatest contributors for the decline in the US-IPO market. The section 404 of Sarbox is the most contentious aspect of the legislation requiring management and the external auditor to report on the adequacy of the company’s internal control over financial reporting (ICFR).

    It is also the costliest aspect of the legislation for companies to implement. It involves the documenting and testing of the important financial controls both manual as well as automated, which in turn requires enormous resources of the company in terms of infrastructure and manpower allocation.

    It requires an upgrade to the corporate IT infrastructure to comply with all the reporting requirements as required by Sarbox. Implementing SOX section 404 could potentially cost a mid-sized company approximately 5% of total sales revenue in the first year and approximately 2.5% of total sales revenue every year thereafter.

    No wonder the accounting firms love SOX as it contributes to a fat portion of their total revenues for consulting on implementing and reporting requirements for Sarbox.

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  • Brilliant Article

    Brilliant article, Mr. Maalouf has hit the nail exactly on the head. The U.S. has regulated itself out of the investment banking industry, Wall Street as we know it is gone and now the country is suffering. Mr. Obama perhaps you should consider nominating Mr. Maalouf as your new Secretary of Commerce, he seems to be one of the few people who understand the cause of the current crisis and therefore how to solve it.

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