As the number of companies restating their financials increases—affecting not only their own management but also mutual fund companies and investors—businesses have begun to call on the Securities and Exchange Commission to make dramatic changes to the Sarbanes-Oxley accounting rules, Business Week reports.
Last year, 10% of the 12,250 or so public companies had to restate their financials, up from less than 1% in 1997.
“Did all of these [companies] get it wrong because they were incompetent, lazy or engaging in fraud?” asks Robert C. Pozen, chairman of MFS Investment Management.
The trouble is, business leaders say, not only does Sarbanes-Oxley impose more complicated standards on them, but the SEC is inconsistently and capriciously reinterpreting those rules.
The two biggest business groups leading the revolt are the Committee on Capital Markets Regulation and the Commission on the Regulation of U.S. Capital Markets in the 21st Century. Treasury Secretary Henry M. Paulson has endorsed the first group, while the U.S. Chamber of Commerce sponsors the second.
Evidently, their voices are beginning to be heard, for earlier this month, the SEC Held a special meeting to discuss curbing Sarbanes-Oxley.
Ironically, because restatements have become so common, investors don’t react as negatively to them as they did when they first started happening.