TSX Group CEO Barbara Stymiest today warned that, “the U.S. Sarbanes-Oxley legislation appears to be off the rails and that the rules and regulations designed to attract and protect investors do not meet the standards already in place in Canada.”

“The U.S. market, a market once routinely described as the most prestigious in the world, has lost at least some of its cachet — no matter how temporarily,” said Stymiest. “The Sarbanes Oxley rules and regulations designed to attract investors are scaring away companies for them to invest in. That is not good for them or us.”

In a speech to the Directors’ Governance Summit, Stymiest stressed that the practice used by Canada, the United Kingdom and Australia of improving corporate governance by imposing guidelines and demanding disclosure and transparency has proved far more effective than the regulation-based system with its loopholes in the United States.

Stymiest applauded Canada’s decade-long track record of addressing corporate governance, dating back to 1993 when Peter Dey began looking at ways to improve corporate governance in Canada. Results from his 1994 report have made significant impact in areas of corporate governance, including the separation of the roles of CEO and chairman, and the independence of Boards, two areas where Canadian public companies are far ahead of their American counterparts.

“At the core of the Canadian approach is the idea that a strong chief executive should be checked and balanced by a strong, independent board,” Stymiest said. “The U.S. has powerful CEO’s, weaker boards and a robust system of criminal and civil liability, all in the context of a highly litigious political and regulatory culture.” Sarbanes-Oxley does not correct this problem.

Stymiest also pointed out the Sarbanes Oxley legislation still requires considerable work by the SEC before it can take effect. But, she said, not only is it no longer clear what the Americans are going to do, it is no longer clear who is going to do it.

“The Chair of the Securities and Exchange Commission is gone,” she said. “The chief accountant of the SEC is gone. The chair of the new accounting oversight board — the centerpiece of Sarbanes Oxley — lasted a month.”

She also criticized those who continue to call for U.S.-style rules for Canada. “Enron, Andersen, WorldCom, Tyco are American stories, not Canadian,” she said. “They operated in the loophole world that is American corporate culture. Not Canadian.”

In contrast, she said, the Canadian corporate scandals — Bre-X, Cinar, Livent, YBM Magnex involved criminal acts against which Canada has ample legal ammunition, whether in the statutes or the jurisprudence.

Stymiest said there is still much Canada can do to improve, particularly in the area of disclosure. And, noting that 15 months ago she was the lone voice speaking in favour of a national regulator, she said it appeared the country was seriously on a course to improve the fragmented regulatory system.