Treasury Secretary Henry Paulson said that U.S. rulemakers should consider adopting "principles-based" regulations and accounting standards in a speech at the Capital Markets Competitiveness Conference.Paulson said that in particular, there should be a focus on three issues in the United States -- the country’s regulatory structure, its accounting industry and its legal and corporate governance environment.

While Paulson said that the principles behind, and most of the results of the Sarbanes-Oxley Act have been largely positive, there is still a need to be vigilant that the country’s markets remain the best in the world.

“Our regulatory system has served us very well over the course of our history,” Paulson said. “Yet, the addition of new regulators over many years, and the tendency of these regulators to adapt to the changing market by expanding, as opposed to focusing on the broader objective of regulatory efficiency, is a trend we should examine.”

In assessing how the current system works, and where it can be improved, Paulson said close attention should be paid to conducting a cost-benefit analysis of new regulations. He added that the cumulative impact of regulatory changes has specifically affected the interaction between auditors, corporate management and board members -- which is not necessarily a constructive development.

Paulson also questioned whether the concentration of the major accounting firms is a sustainable business model for the profession, as well as whether or not the system is producing high-quality audits and attracting talented auditors.

Paulson said that the Treasury will be developing specific steps to keep U.S. markets up to speed.

The independent Committee on Capital Markets Regulation, which Paulson has previously spoken in support of, released a report last fall that urged legislators to consider overhauling similar aspects of the country’s enforcement policies and litigation system.

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