Most institutional investors believe regulatory reforms have reached a high-water mark and are likely to be rolled back over the next five years, according to a survey by Broadgate Consultants LLC.
"There's a growing sentiment among investors that the intensity of reform has reached fever pitch," said Alan Oshiki, a managing director at Broadgate. "What they're looking for over the next five years is a moderation to bring the cost and benefit back into balance."
Most of the 91 portfolio managers and buy-side research professionals surveyed viewed three recent events as suggesting reform is likely to moderate: the acquittal of former HealthSouth CEO Richard Scrushy on charges related to an accounting fraud at the company, which respondents viewed as a major setback for the Sarbanes-Oxley Act; the U.S. Court of Appeals ruling that ordered the SEC to review its rules related to mutual fund governance; and the departure of SEC Chairman William Donaldson, whose last day is today.
"Nearly two-thirds of those we surveyed are taking a very counter view to these reforms," Mr. Oshiki said. He added nearly 60% of respondents believe regulations have led companies to be more guarded and less open to communication, making it more difficult to accurately ascribe value to a company's shares.