Contact:
Alan Oshiki
Broadgate Consultants, Inc.
203-232-2222
SCRUSHY ACQUITTAL, DONALDSON DEPARTURE
AND LEGAL SETBACK MAY HERALD ROLLBACK OF REGULATORY REFORMS INVESTORS EXPECT SHIFT IN U.S. REGULATORY POLICY, ACCORDING TO SURVEY
NEW YORK: June 29, 2005 — The aftermath of Richard
Scrushy’s acquittal, viewed as a setback for the Sarbanes-Oxley Act, and the
pending departure of SEC Chairman Donaldson, may signal a move toward moderation
of recent regulatory reforms. A survey of investors after the recent U.S. Court
of Appeals ruling that ordered the SEC to review its rules related to mutual
fund governance supports the view of a possible rollback of the recent reforms
introduced by the SEC.
Broadgate Consultants, Inc. surveyed 91 portfolio managers and buy side research
professionals. Half of the survey’s respondents believe the Appeals Court ruling
to be the start of a broader trend that may alter the direction that the SEC has
taken on a range of corporate governance and disclosure matters, and welcome the
possibility of a rollback. The SEC today approved a mutual fund governance rule
rejected recently by the Court, setting up a legal showdown.
Nearly two-thirds, or 61% of those surveyed, said they believe the regulatory
environment related to corporate disclosure and governance is likely moderate in
order to balance costs and benefits over the next five years. In addition, 63%
of the buy-side participants do not believe that the costs of compliance with
regulatory requirements, such as Section 404 of the Sarbanes-Oxley Act, are
commensurate with the benefits to investors. Underscoring this concern is that
nearly 60% of survey participants believe the regulations have encouraged
companies to be more guarded and less communicative – making it more difficult
to ascribe accurate value to a company’s shares.
According to the survey, the buy-side respondents have mixed feelings on the
choice of Christopher Cox for SEC Chairman. Nearly half of respondents were
unsure if the selection of Cox is a positive development for market regulation
and a benefit to investors.
Among related issues covered by the survey: With more than 78% of the U.S.
public companies being audited by the “Big Four” accounting firms, about
two-thirds of survey respondents said they were concerned about the market
concentration among these top-tier firms. However nearly half did not believe a
collapse was imminent in the near future for any of the “Big Four.”
Three-quarters of respondents are unsatisfied with the level of self-regulation
among the major stock exchanges and believe the exchanges could do a better job
of policing their members.
Reponses were mixed in relation to the proposed merger between the New York
Stock Exchange and Archipelago: 57% are not sure if the merger will be
completed, while 32% are confident it will be completed and 11% not confident of
its completion.
About Broadgate Consultants, Inc. Established in 1987, Broadgate Consultants, Inc. provides
strategic corporate and capital markets communications advisory and
implementation services to public companies and private equity firms and their
portfolio companies. Its clients include global public companies, including many
with ADRs listed in the U.S., as well as private equity firms with assets under
management ranging from $100 million to more than $5 billion. The firm is also
recognized for its crisis management services. Broadgate is an operating unit of
D.F. King & Co. Inc. The firm is also a Partner in Public Relations Organisation
International (PROI), the world's oldest international partnership of
independent public relations and marketing firms. More information about
Broadgate can be found on the Internet at www.broadgate.com
