Financial Regulatory Reform Post-Financial Crisis: Unintended Consequences for Small Businesses
By Regina F. Burch.
Although a visit to a small business—from the local, fast order food shop to the dry cleaner and gas station—is an integral part of everyday living, small businesses play an underappreciated role in the United States economy. For example, most business news stories involve large, publicly traded companies. However, the number of small businesses vastly overshadows the number of large businesses. In addition, small businesses’ contribution to the United States economy is overshadowed by media reports of ethical conflicts and potentially unlawful conduct at larger businesses. According to the Small Business Administration Office of Advocacy, in 2006 there were an estimated “29.6 million businesses in the United States. Small firms with fewer than 500 employees represent[ed] 99.9 percent of those businesses” and 73.3 percent of US businesses had no employees. As of 2006, only 18,000 firms qualified under Small Business Administration criteria as large firms.
This Article proposes that legislators and regulators should learn from the experience of how Sarbanes-Oxley affected small businesses—those that are publicly traded and those that are not—and devise financial regulatory reforms with those experiences in mind. It does not assert that Sarbanes-Oxley and consequent business practice changes unfairly and adversely affected small businesses, although the reforms’ costs clearly are proportionately higher for small businesses and are easier to quantify than the benefits. Indeed, this Article proposes a cost/benefit analysis to examine: (1) the Dodd-Frank Act’s effect on small businesses expressly required to comply with the reforms; and (2) the act’s impact on small businesses affected by changes in business practices and advisors, because whether intended or unintended, legislated or trickled down, the benefits of regulation exist. Further, that cost-benefit analysis ideally should occur either before the implementation of regulations or, at the latest, in the early stages of implementation.
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