SOX Center

Since the days of America’s first Treasury secretary, Alexander Hamilton, New York’s financial markets have driven and sustained the nation’s economy. And for the last century, companies worldwide that sought to raise capital overwhelmingly came to the United States.

Sadly, and distressingly, that era may be coming to an end, as companies looking for money on the public markets are increasingly going to Europe or Asia. In 2005, initial public offerings of stock in Europe surpassed those in America — in both number and dollar volume. Even as the American IPO market improved in 2006, that trend accelerated: According to PricewaterhouseCoopers, there were 651 IPOs in Europe last year, versus 224 in the U.S., and the European offerings raised almost $40 billion more dollars. China’s markets, with fewer IPOs, raised 30 percent more capital than those in the United States.

WashingtonPost.com: Are U.S. IPOs DOA?

Attempts to overturn portions of Sarbanes-Oxley may pick up steam this week after an April 4 report showed the value of European stock markets has overtaken U.S. markets for the first time since World War I.

The seismic shift in the value of equity markets is a further blow to the New York Stock Exchange and other U.S. markets, which have seen some of the larger initial public offerings opt for overseas markets instead of their traditional NYSE home.

Critics of SarbOx blame the recent regulation for pushing the IPOs abroad. They claim the legislation makes compliance in the U.S. too costly.

The number of venture-backed initial public offerings awaiting their stock market debut more than doubled at the start of 2007 with a tech filing from Omneon Video Networks marking a late-entry addition to the roster.

Hailing largely from the tech sector, the ranks of venture-backed IPOs swelled to 36 as of Tuesday, up from 16 in the year-ago period, but down from 51 at the start of the busy fourth quarter of 2006, according to a survey by the National Venture Capital Association and Thomson Financial.

Mark Heesen, president of the National Venture Capital Association, said an overhaul of the Sarbanes-Oxley law could help small companies eying IPOs.

“There is the potential to see measurable Sarbanes-Oxley relief for smaller public companies in 2007, which would be a welcome boost for the U.S. IPO market,” Heeson said. “In absence of this reform, however, venture capitalists will look at other liquidity paths — foreign exchanges or sale to financial intermediaries — as viable exit alternatives in the coming year.”

Marketwatch: Venture-backed IPOs perking up

Hong Kong surged past New York this year and became the world’s second most popular place _ after London _ for companies to float new stock listings.

The city’s amazing success was due to several factors, analysts say. Being next door to mainland China’s booming economy was a huge help. Tough new U.S. accounting rules have discouraged many companies from listing in America.

Hong Kong’s big advantage now is that it has a solid legal and financial system that can handle big initial public offerings, or IPOs. Shanghai isn’t close to being able to match this city, and that’s why a parade of China’s biggest banks decided to launch record-breaking IPOs in Hong Kong this year.

One of them was the world’s biggest ever: the $21.9 billion offering in October by Industrial & Commercial Bank of China, the mainland’s largest lender.

With two weeks left in the year, Hong Kong has raked in HK$307.7 billion, or US$39.57 billion, in IPOs _ nearly twice as much as the HK$165.7 billion raised last year, according to Hong Kong Exchanges & Clearing Ltd., the listed firm that operates the stock exchange.

London was the world leader for IPO equity raised, with $48.92 billion raised, according to the World Federation of Exchanges. Hong Kong was second and the New York Stock Exchange lagged back in third with $33.61 billion, according to the most recent WFE figures, which included the January-November period.

That may be partly because some American companies are holding back from listing in the U.S. due to the strict rules under the Sarbanes-Oxley anti-fraud law, opting instead to stay private.

Washingtonpost.com: Hong Kong Passes NYC in Attracting IPOs

Steve Forbes, chief executive of media giant Forbes, has predicted that US lawmakers will implement major changes to the controversial Sarbanes-Oxley (SOX) Act, in the wake of the sentencing earlier this week of disgraced Enron executive Jeffrey Skilling.

Speaking after his keynote speech at SAS’ BetterManagement Live conference in Las Vegas yesterday, Forbes argued that the SOX corporate reporting legislation had been rushed through in the wake of the collapse of Enron and Worldcom. As a result, he said the rules were ineffective, onerous and unnecessary.

“A person intent on committing fraud will not be deterred by paper walls,” Forbes said. “The best [defence against] corporate crime is stiff jail sentences.”

Forbes insisted the legislation was damaging the US economy, resulting in IPOs that would have been undertaken in New York being lost to London and Hong Kong.

“The brain power and time that goes into [complying] should be spent on productive pursuits rather than on this activity that does very little in either improving internal procedures or preventing crime,” Forbes argued. “I think there is going to be, and should be, a relook at Sarbanes Oxley in a more calm atmosphere now that Jeffrey Skilling is going to be out of circulation for a while.”

Advocates of SOX have argued that while costly in the short term, forcing firms to develop systems and processes that provide better visibility over their operations helps them optimise performance and improve governance.

Here the link to the story of IT Week.