After plenty of pre-announcements, strategic leaks and commentary, the move to rewrite Sarbanes-Oxley keeps gaining momentum with the release of the Hank Paulson-backed Interim Report of the Committee for Capital Markets Regulation.

As an alternative, the press release is here.

Basically the group of prominent academics and business leaders delivered what they were required to do. And what a package! Reading through it, I'm still trying to work out how much of it is an ambit claim. Proposals include:

*scope to replace shareholder class actions with arbitration.
*reducing the scope for criminal enforcement against companies, using it only as a last resort and not holding directors responsible for corporate malfeasance and protecting them against liability when they claim they have relied in good faith on the validity of audited financial statements that turn out to be dodgy.
*limiting the liability of audit firms, even if they have colluded in the preparation of shonky accounts.
*giving federal regulators precedence in enforcement matters, a move that would in effect stymie the Eliot Spitzers of this world.
*exempting companies with market values of less than $75 million from Sarbanes-Oxley audit requirements unless costs are brought in line with benefits, the same sort of companies that are more likely to have accounts subject to restatement.

All part of the trend that sees deregulation back in style, says Forbes.

The reaction has been mixed, and some of the criticism has been savage.



Former SEC chairman Richard Breeden described it as "elegant whining" and New York governor-elect Eliot Spitzer has vowed to "personally appear on Capitol Hill and appear with tens of thousands of investors to defend against these wayward and wrong-headed proposals", reports the New York Times.

Note too that the New York Times piece points out that the committee got some of its funding from the Starr Foundation, an outfit run by former AIG insurance executive Maurice Greenberg, who was forced out because of accounting irregularities.

The Council of Institutional Investors has issued a statement condemning the broad thrust of the committee's recommendations, saying it would defang market watchdogs and undermine investor protection. That said, the council agrees that certain changes are needed, included a tweaking of Section 404 of Sarbanes-Oxley.

Which raises the question as to which way the new Democrat-controlled Congress will go. Christopher Dodd, who will run the Senate Banking Committee, has already come out against any changes to Sarbanes-Oxley, according to this news report.

Still, with Democrats like Nancy Pelosi and Barney Frank saying SOX needs an overhaul, it's going to be fascinating to watch this space.