Volume 14 (2003) / Issue 5
Kai-Alexander Heeren, Oliver Rieckers, 'Legislative Responses in Times of Financial Crisis – New Deal Securities Legislation, Sarbanes-Oxley Act and Their Impact on Future German and EU Regulation' (2003) 14 European Business Law Review, Issue 5, pp. 595–628
The German Federal Government and the High Level Group of Company Law Experts set up by the European Commission have recently published proposals to foster the development of deep and liquid German/European capital markets. The proposed regulation shows remarkable resemblances to the Sarbanes-Oxley Act of 2002 (SOA). By comparing the SOA to the U.S. securities legislation of the New Deal era this article critically reviews the American answer to the recent corporate scandals. The authors doubt that the SOA has the capability of substantially improving the situation. In the long-run it may even cause adverse effects for U.S. capital markets. The future German/European regulatory approach has to avoid any overregulation and should not overstress investor protection, since investor protection should only be seen as a means to an end, i.e. the preservation of deep and liquid capital markets. The legislator should decide, whether it wants to rely primarily on a strong internal corporate governance structure or if it wants to follow a more market-based approach. As the recent U.S. legislation shows, a combination of internal and external corporate governance elements easily runs the risk of leading to inefficient overregulation. Thus, any hybrid approach has to be carefully balanced.
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