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SEC Protect Public Investors (fka sec rules)

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SEC Protect Public Investors (fka sec rules)

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lrice Grandfathered
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SEC Protect Public Investors (fka sec rules) RSS Feed

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Extra! SEC Changes Rules to Protect Public Investors Feb. 13 (Jack s Journal) In an effort to make sure investors have a better picture of a company a lot sooner, the rookie chairman of the SEC will rare back and pass some new rules to make companies file financial reports sooner. It won t do much for the average investor, but like chicken soup it couldn t hurt. SEC Chairman Harvey Pitt s new rules would make companies (1) report insider stock buys and sells in days, not a year; (2) file 10K annual reports within 60 days, instead of 90, of the end of the fiscal year, and 10Q quarterly reports within 30 days, instead of 45; (3) cover default-causing events and ethics waivers in their 8K significant event filings within days. Those are the major changes. There are 9 more. Pitt revealed his philosophical background for such rule-changing in a talk to the Securities Regulation Institute last month. The Enron debacle is tragic, Pitt said, and many Americans have felt its sting. Innocent investors have been betrayed by our system of disclosure and accounting& To reassure investors and restore their confidence, we need to address the systemic flaws in our current disclosure and accounting systems. These problems have gone un-addressed for many years& The SEC's first responsibility is to protect public investors& If major and sweeping changes are to be made, even by rulemaking, Congress should, and must, be an active participant in the process, Pitt said. There are many systemic problems that need repair in the wake of Enron. In my view, these include at least the following: --an outdated disclosure model that does not provide timely disclosure when it is most needed, and focuses on historical information while neglecting current and trend information; --the lack of clear and transparent financial statements; --a system that encourages disclosure directed more at averting liability than at informing; a private-sector standard setter that has a long and critical agenda, but takes too long to address critical accounting issues and is slow to finalize the principles it does address; --an audit model misfocused on a nonexistent "thaumaturgic" or magical number that diverts attention from a company's trends and unfolding, dynamic situations; --analysts whose name sometimes belies the failure to apply sound analysis to difficult financial models; --an insufficiently strong and effective quality control and vigorous and transparent professional disciplinary procedure for accountants and accounting firms that engage in unethical or incompetent accounting and audit practices; --audit committees that often do not understand the accounting principles employed by management, or the consequences of using different principles or different assumptions. Today s rule changes may be the start of a sincere effort to protect the public investor. One can only hope so.
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