Investors Are Worse off a Year After Dodd-Frank's Passage

Investors Are Worse off a Year After Dodd-Frank's Passage

Investors Are Worse off a Year After Dodd-Frank's Passage

Dodd-Frank legislation was intended to change how companies behaved, but Mercatus Center Senior Scholar J.W. Verret says that those changes have made investors worse off a year after the act's passage.

“Companies are facing higher compliance costs that they are passing through to their investors in the form of lower dividends and lower returns,” said Verret. “Additionally, companies that would have listed in the U.S. instead listed overseas to avoid registering with the SEC, and American investors have missed out on investing in these companies.”

Additionally, Verret says that deadlines given for the size and scope the rule-making were impossible for agencies to meet.

“We learned it’s a bad idea to put implementation deadlines in the legislation,” said Verret. “In the intermediary, firms are operating in a cloud of uncertainty, as there’s no way for Congress to mandate that the agencies go faster."

Further, Verret said the new rules Congress instructed the SEC to implement have nothing to do with the financial crisis:

"The corporate governance provisions of the Dodd-Frank Act, like proxy access or say-on-pay, were a victory for Union Pension Funds who want more power over the boards of publicly traded companies. These things had nothing to do with the financial crisis. They didn't have a ticket, but they hitched a ride on the Dodd-Frank bus as it was passing through."

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