Tomorrow, the chairman of the Securities and Exchange Commission, Chris Cox, will testify on the Sarbanes-Oxley securities law before the House Financial Services Committee. That committee is chaired by none other than Michael Oxley, co-author of the now controversial law under review.

Written in 2002 in response to the corporate financial abuses of WorldCom and Enron, the Sarbanes-Oxley law is perhaps the largest expansion of government regulation of a sector in the past two decades. Written ostensibly to restore investor confidence in public securities, the costs of the law have overshadowed any possible benefits.

As with any new regulatory law, the exact compliance standards for Sarbanes-Oxley have been difficult to predict and will take many more years to resolve. The enormous penalties from noncompliance, however, are not difficult to predict. Consequently, corporate management, boards, and external auditors go to great lengths to comply with the new SEC rules.The expense is large, both in terms of the direct cost of financial accounting and management distraction from the uncertainty of compliance.

The greatest cost of Sarbanes-Oxley is derived from the law of unintended consequences. Nonprofit organizations, foreign-registered corporations, and others that are not directly covered by the new law worry that they are caught in the web of Sarbanes-Oxley. A law aimed at reinforcing faith in American financial securities has ensnared many entities not involved in those securities.

All of these costs might plausibly be worthwhile if investors and corporations had increased confidence in securities traded in American markets. Positive signs for the law would include increased registration of international corporations and their securities in America, a shift from private equity to public equity, and a shift from private debt to public debt.

We find just the opposite. To avoid Sarbanes-Oxley, many public corporations have been taken private in recent years, and many private corporations that previously would have considered public offerings have decided against them. Initial public offerings and other securities by international corporations are increasingly going offshore in large part because underwriters and investors are frightened by Sarbanes-Oxley. Of course, American financial markets remain strong, but that strength appears as much despite and not because of Sarbanes-Oxley.

Perhaps the clearest indication of the harm of Sarbanes-Oxley came last week when the British government announced new legislation to clarify that companies registered on the London Stock Exchange would not be covered under Sarbanes-Oxley if the LSE were to be controlled by an American corporation. Nasdaq, which already has more than a 25% interest in the LSE, could take control of it as early as October.

Before Sarbanes-Oxley, British investors and corporations would have looked indifferently at the protections of American securities laws. Today, they look in horror because of the enormous financial accounting costs and regulatory uncertainty.

The great irony is that for decades we Americans have rightly sneered at the unbalanced regulatory tendencies of much of Europe. We ridicule European regulations for which the costs substantially outweigh any plausible public benefit. With Sarbanes-Oxley, our law becomes the standard for disdain, a much feared American export. Europeans can now rightfully sneer at our unbalanced regulatory tendencies.

Mr. Cox has done as good a job as possible of implementing Sarbanes-Oxley, but even the chairman of the SEC cannot change laws. As a member of the House of Representatives, Mr. Cox was an effective legislator and was the principal sponsor of a major financial deregulation law in 1995.

Mr. Cox was perhaps best known for his principled positions and his enormous intellect. If Mr. Cox were still a congressman, there is much about the Sarbanes-Oxley law and its implementation with which he would likely disagree. A witness with an intellectually weak position would not want to face Mr. Cox in an oversight hearing.

The role of SEC chairman is quite different from that of congressman. A principled government official must defend the laws and rules governing his or her organization, even if the official personally disagrees with some or even all aspects of those laws.

Tomorrow, Mr. Cox will defend the law, and he will defend the SEC’s implementation of the law. Fortunately for Mr. Cox the regulator, he will not be grilled by Mr. Cox the legislator.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.