Capital Flight

Be afraid when a Democrat-dominated, “influential House committee is set to hear testimony from all five commissioners of the Securities and Exchange Commission today—the first time that has happened in at least 10 years.” Yes, the SEC is making a House call, as the Wall Street Journal put it.

What new havoc will the SEC wrecking ball wreak? That’s too early to tell. So far, according to FreedomWorks, the Republican Party’s Sarbanes-Oxley Act of 2002 has had the following effects on American capital markets:

“Between 1996 and 2001, the New York Stock Exchange (NYSE) averaged fifty new non U.S. listings annually; in 2005, it gained nineteen.

London’s AIM (Alternative Investment Market) had 335 initial offerings of securities in 2005 – twice the total in 2000, while Nasdaq had 126, down 65 percent.

In 2000, nine of every ten dollars raised by foreign companies were raised in the United States; in 2005, nine of the ten largest offerings were not registered in the United States, and of the largest twenty-five global offerings, only one took place in the U.S.

The government accounting office (GAO) found that the number of public companies going private increased from 143 in 2001 to 245 in 2004.

In 2000, nearly half, 46.8%, of the global IPO equity was raised on U.S. exchanges. However, in 2005, only 5.7% of dollars raised by non U.S. company IPOs was raised through shares listed on U.S. stock markets subject to U.S. regulatory rules and oversight.

The total inflation-adjusted value of securities class-action settlements increased to $9.6 billion in 2005 from $150 million in 1997.

The Sarbanes-Oxley Act of 2002, which placed extremely costly additional financial burdens, is estimated to have ‘cost in lost market value of U.S. companies at $1.4 trillion.’ In addition, it appears that the requirement for independent-director majorities on corporate boards has reduced the willingness of corporations to take risks, which will have a long run, adverse effect on U.S. economic growth.”

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