Economies, Capital Markets, and Securities Law

The debate over Sarbanes-Oxley's specific provisions has already given rise to attempts by proponents of private ordering to revisit the wisdom of American-style, comprehensive securities regulation. This article explains the economic rationale that underlies the SEC's program of mandatory disclosure and comprehensive anti-fraud regulation. It then surveys an impressive body of empirical evidence that has generally been ignored by the SEC's critics. That evidence makes a very strong case for stringent SEC regulation by showing how it facilitates the development of the capital markets that are so necessary to economic development and growth. Finally, this article contributes its own empirical study that further bolsters the case for comprehensive securities regulation. Whatever the specific failings of Sarbanes-Oxley, it should not provide the occasion for any serious deregulation of American securities markets