Tuesday, August 14, 2007


Unintended (but predictable) Consequences

“Nasdaq is set to launch tomorrow what its executives are calling one of the most significant developments on Wall Street in decades -- a private stock market for super-wealthy investors.

“Minimum requirement for traders: $100 million in assets.” Nasdaq Gives High Rollers A Market Free Of Regulation - washingtonpost.com

Unfortunately, I’m not yet in that league of investors so I am effectively shut out of these potential investments as, I suspect, are some of you.

I’m guessing that some of these potential investments have real merit to them because, unless someone inherited or married into their wealth (i.e. John Kerry, Jay Rockefeller and Ted Kennedy), people with $100 million in assets tend to know a thing or two about wealth development. But (sigh!), thanks to the hard-working (don’t let their current month-long vacation fool you) folks on Capital Hill (and an all-too compliant President in this case), most of us are “protected” from the vagaries of such investments.

“For the first time last year, corporate America raised more money -- $162 billion -- from private investors than from initial public offerings, which raised $154 billion from the three major U.S. stock markets -- Nasdaq, the New York Stock Exchange and the American Stock Exchange.”

Why do companies go the private route?

“These companies would remain private and not have to make public their financial statements or submit to federal regulation, such as the Sarbanes-Oxley corporate accountability law.”

This doesn’t give Sarbanes-Oxley enough credit. The cost of that legislation is significant and it is not just financial. It involves tedious, mundane documentation efforts that can quickly kill a person’s ambition to enter the internal and external auditing professions. Many perceive – correctly I believe – that it is trap waiting to be used by lawyers in a future class-action lawsuit. Accordingly, many companies have implemented an EXPENSIVE, preemptive, over-the-top compliance strategy. If you’re in a position to decide whether to subject yourself to it, saying the hell with it makes a lot of sense.

The lasting legacy of our own Senator Sarbanes.

I like to say that Sen Kerry made money the old fashioned way - he married it.
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