WASHINGTON, Nov 30: A coalition of business leaders and academics said on Thursday that US company regulation had become too onerous in the post-Enron era and urged reforms including an easing of the Sarbanes-Oxley law.

A report by the coalition, adding fresh momentum to other reform calls, said the competitiveness of America’s capital markets was being threatened by “excessive regulation and litigation.”

The Committee on Capital Markets Regulation, an independent panel started by a Harvard University academic, said urgent changes were needed to shore up US capital markets in a more competitive global market.

Citing a heavy fall in US IPO activity, coupled with a rise in the number of American companies choosing to go private, the report said accounting standards had become too rigid in the wake of Enron’s 2001 collapse and other recent business scandals.

The coalition is worried that New York is rapidly losing ground as a key financial centre to London and Hong Kong due to the new US regulatory landscape.

Its report was issued a week after Treasury Secretary Henry Paulson called for a “more agile” regulatory framework for publicly traded US companies.

Paulson has voiced concern about the decline in the number of companies seeking a public listing, or initial public offering (IPO), on US exchanges.

US regulatory rules, including the 2002 Sarbanes-Oxley law which tightened accounting and reporting requirements, were implemented after a slew of recent corporate scandals, such as Enron’s collapse and the government’s prosecution of auditor Arthur Anderson.

The panel’s report said that criminal indictments of companies should be a “last resort,” and that outside executive directors should not be held “responsible for corporate malfeasance that they cannot possibly detect.”

Among other recommendations, the panel also said companies should ask shareholders to waive the right to a jury trial and seek recourse before a judge instead, as well as urging better coordination between federal and state securities regulators.

Judges tend to approve lower damage awards against companies that engage in wrongdoing compared to citizen juries.

The panel also backed a so-called principles-based rules system which is perceived as being less rigid for auditors.

US accountants currently operate under a rules-based system which is seen as being more burdensome than the principles-based system favoured in Europe.

The panel said it issued its interim report to foster a wider public debate about the competitiveness of US capital markets.

—AFP