HENRY PAULSON, the US Secretary of The Treasury, gave a strong signal yesterday that he favours reform of the Sarbanes-Oxley Act as he expressed his support for a group of businessmen and academics seeking to overhaul the controversial canon of business law.

The Committee on Capital Markets Regulation, a group made up of some of America’s leading business professors and executives, began a three-month study of Sarbanes-Oxley and other elements of US regulation to determine their effect on the country’s competitiveness.

Mr Paulson and the US Treasury stopped short of giving the committee an official federal endorsement, but the former Goldman Sachs chief executive made clear that he supports their cause.

“I am pleased to learn that the Committee on Capital Markets Regulation, an independent group of highly respected leaders in each of their fields, will examine the competitiveness of the US public capital markets,” Mr Paulson said in publicity material released to mark the committee’s launch. “This issue is important to the future of the American economy and a priority for me.”

The committee wants to examine the charge that America is suffering economically because of a surfeit of regulation ushered in with gusto since the fraud scandals at Enron, WorldCom and other companies that rocked confidence in the public markets and regulators’ ability to oversee them.

The committee hails itself as “non-partisan” and “independent” but some of its principal members indicated that America is suffering from the loss of its competitive edge in a rapidly globalising economy.

John Thornton, chairman of the Brookings Institution, a Washington think-tank, and co-chairman of the committee, said: “There are clear signs that global confidence in our capital markets has been diminished. It is very timely that we seek the creative thinking of some of our country’s leading academics and business professionals.”

Section 404 of the Sarbanes-Oxley Act, a law that requires senor executives of public company’s listed in America to sign off accounts and take full responsibility for their contents, is central to the committee’s study. The section has come under fire from executives worldwide, who claim that it is costly, time-consuming and difficult to implement.

Executives at Enron and WorldCom tried to sidestep responsibility for fraud undertaken on their watch by claiming that they did not know about the fine detail of their financial statements.

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