Michael Oxley, vice chairman of NASDAQ, anchors Rice Alliance event

The Sarbanes-Oxley Act — five years later
Michael Oxley, vice chairman of NASDAQ, anchors Rice Alliance event

BY C.J. PAPPAS
Special to the Rice News

The Rice Alliance for Technology and Entrepreneurship recently commemorated its eighth year with a celebration of the U.S. and global capital markets by hosting Michael Oxley, co-author of the Sarbanes-Oxley Act and now vice chairman of NASDAQ.

This year’s kick-off event was the largest ever with more than 450 attendees. The event also represented a milestone in the Sarbanes-Oxley Act, which was signed into law almost exactly five years ago on July 30, 2002. 

MICHAEL OXLEY

Oxley delivered a speech on ”The Future of the Global Capital Markets” to the crowd of entrepreneurs, investors, business leaders, service providers and members of the Rice community. He discussed key developments and regulatory issues that will impact the future of global capital markets including the Sarbanes Oxley act.

He talked with pride about a successful initiative earlier in his congressional career to increase competition in the capital markets through the decimalization of the U.S. capital markets. Oxley felt that company stocks should be traded in dollars and cents rather than in fractions. By narrowing the trading spread, billions of dollars stay in the accounts of investors rather than being captured by Wall Street trading firms.

According to Oxley, world markets are scrambling to pattern themselves after the speed, transparency, valuations and technology of U.S. markets and the premier markets increasingly are very competitive. Overall, the structure of world markets has changed quickly and considerably, and market consolidations on a global scale have become today’s reality.

Using a recent example to illustrate this trend, Oxley discussed a $3.7 billion transaction between NASDAQ and OMX, a major European exchange based in Sweden. These groups have announced they will combine to create the world’s broadest exchange and an elite technology company.

Oxley said that emerging markets outside the U.S. are rapidly closing the gap and becoming a viable option to the United States. PricewaterhouseCoopers projects that stock exchanges in mainland China will be recipients of more than $52 billion in initial public offerings (IPO) this year, dwarfing the value raised in any other country.

It’s this very competitive, technology-driven international environment that makes it difficult for countries to overcome unilateral, self-imposed handicaps. That’s why, said Oxley, it’s important to understand the impact of international IPOs and the Sarbanes-Oxley Act, especially section 404.

American markets still offer huge and unique advantages even though it may be easier to list elsewhere. When the best companies in the world consider an IPO, they acknowledge the incredible liquidity of U.S. markets and realize the access to the world’s most sophisticated investors consistently produces world-class valuations and visibility.

Five years after the passage of the Sarbanes-Oxley Act, Oxley feels its benefits are clear. He states that the core reforms, such as independent boards, a financially experienced member of the audit committee, CEOs and CFOs signing off on financial statements are obvious. These are the main reasons major players in the world’s economy are adopting reforms that mirror Sarbanes-Oxley. 

Oxley admits there is evidence the Sarbanes-Oxley Act is influencing entrepreneurial decisions on where to list a new IPO and is criticized for the disproportionate financial burden it places on smaller companies. Oxley stated that he was encouraged by current improvements to the act and capital markets. For instance, he mentioned an initiative to standardize accounting rules and financial reporting on a global basis, thereby reducing costs for companies that operate internationally.  

Overall, Oxley was upbeat and encouraged about the current state of the global capital markets. He was equally complimentary of the role the Rice Alliance has played in building technology entrepreneurship in Houston and in Texas.  He mentioned that Texas is now the fifth largest state in value of public companies on the NASDAQ, with a value of more than $144 billion, a third of which are headquartered in Houston.

The Rice Alliance for Technology and Entrepreneurship assists in the creation of technology-based companies and the commercialization of new technologies in Houston and Texas. The Rice Alliance has helped launch more than 205 new technology companies that have raised more than $300 million in early-stage funding.