Regulation scares groups from public markets

Financial experts, including Paul Boyle, the CEO of the Financial Reporting Council, IASB chairman Sir David Tweedie and former GlaxoSmithKline CFO John Coombe, have all expressed concern in a report by KPMG that excessive regulation could force public companies to go private.  

'There is a widespread concern that regulation has gone beyond the point at which it is useful,' Boyle said. 'The balance between investor protection and creating prosperity may have been over-stepped.'

Boyle said this was 'driving people off the public markets'. Coombe said companies were 'more cautious about going onto boards' adding that good people were not staying in regulated business because of 'the documentation and personal liability'.

'All private equity is doing is taking companies out of the public domain,' Coombe said. 'They are gearing up and making a fortune when it works and leaving the problems with the banks when it doesn’t.'

Commentators were particularly critical of the United States' Sarbanes-Oxley legislation, which they believed exceeded requirements and placed unnecessary burdens on businesses.

'It is a classic legally-driven American nightmare, which is expensive and is not going to stop people stealing money from companies,' Coombe said. 'Sarbanes-Oxley is expensive but the cost is not justified for the benefit.'

With regards to the introduction of IFRS, the response was upbeat, but Tweedie warned that it would take time for the new standards to settle.

'In the short-term it will be nasty. In the long-term it will be good,' said Tweedie.

KPMG's global head of regulatory issues, Neil Lerner, said companies needed time to get used to the raft of new regulation that they have had to comply with.

'What is clearly needed is a period without new initiatives and an attempt to create a framework to allow convergence around the world,' said Lerner.