Above the Crowd

Why SOX Will Lead to the Demise of U.S. Markets

April 5, 2006:

Everyone should read this article from the CEO of Nasdaq. He is properly concerned that the overly bureaucratic Sarbanes-Oxley (SOX) processes could lead to the end of global domination by the U.S. capital markets. Ironically, the two gentlemen that created SOX did it with the intention of “preserving” U.S. capital market leadership. Their fear was that people viewed our markets as too risky, and so they created SOX to ensure that investors would “trust” our markets.

It turns out that SOX is doing the opposite – it is ensuring the demise of the leadership of U.S. capital markets. New up and coming companies outside the U.S. are now shunning the U.S. markets in mass. Let us not forget that the Nasdaq has and as always had “weaker” listing requirements that the NYSE. And eventually, the then new and up and coming companies like Microsoft, Cisco, and Intel eventually came to dominate the Fortune 500 – and they all started as emerging companies that preferred the Nasdaq.  Now companies are going to “prefer” other markets with requirements that are less stringent than the SOX laden U.S. markets.

This is a HUGE issue. I applaud the Nasdaq BOD for going after the LSE, and I have to wonder whether Mr.  Sarbanes and Mr. Oxley have any idea that they will go down in history as the specific architects of the demise of U.S. capital market leadership.


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  2. RMoney April 6, 2006


    So there is a problem with SOX’s I can agree with you on that. Do you have a solution to the problem or just a problem with the problem?

    Obviously you have strong feelings about it, you havent blogged forever and then you come out with this.


  3. VC Ratings April 7, 2006

    Thus spoke, Bill Gurley

    After writing a monthly column for Fortune magazine since 1998, venture capitalist Bill Gurley gave up the gig a few years back. He then started a blog that goes by the same name as his column, Above the Crowd….

  4. Anon... April 12, 2006


    I saw you in September 2005 and you gave an interesting presentation. Any thoughts on new technologies or MMORPGs?

  5. Adam Jackson February 4, 2009

    Hi Bill,

    I agree with the criticisms of SOX and can even get behind your theory that it may be the beginning of the end of global domination by the U.S. capital markets. The next thing I contemplate is whether or not it’s that big of a deal for anyone other than the NASDAQ and NYSE corporations themselves.

    It can be viewed in terms of simple supply and demand. If the US continues to be the richest source of capital (it likely is not) then companies will continue to list here despite the cumbersome and expensive requirements.

    If not, they’ll look to foreign markets where it may be cheaper and easier to list (and defraud investors). So what? Their home offices will still likely be in whichever country they started out in (no impact to US economy) and US investors will still be able to invest and profit from the growth of these foreign-listed entities. 20 yrs ago this likely would not have been the case, but these days even my lowly eTrade account can buy shares in different global markets.

    Adam (DriverSide)

  6. Pingback: Note To Timothy Geithner: Do Startups & Venture Capitalists Really Need More Regulation? « abovethecrowd.com

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