Replies to post #9060 on Zeev's Turnips Patch-No Politics (ZEEV)

[Steve Lee]

Zeev: Since I can't post on the SI thread and in your defense. I would like to attest to the fact you are right more that 30% OF THE TIME. Scott Jimenez and Mark Johnson have nothing on you.

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=17803187

[augieboo]

Zeev, the reason you're disappointed is that the media hasn't made clear what the SEC has done vs what it intends to do.

What the SEC has done is ordered

that the principal executive officer and principal financial officer of each of the Companies shall either (a) file a statement in writing, under oath, in the form of Exhibit A hereto, or (b) file a statement in writing, under oath, describing the facts and circumstances that would make such a statement incorrect. In either case, such statement shall further declare in writing, under oath, whether or not the contents of the statement have been reviewed with the Company's audit committee, or in the absence of an audit committee, the independent members of the Company's board of directors. http://www.sec.gov/rules/other/4-460.htm

This order is, indeed, pretty limp. But, it is all the SEC has the power to do on it's own, and quickly.

What the SEC intends to do is a bit more substantive.
I think that what you are looking for is contained in several new Rules which the SEC is seeking to implement under the various Securities Acts.

Here is the extremely short form of the SEC's proposal for these new Rules:

We propose to add an explicit certification requirement in connection with the filing of quarterly and annual reports pursuant to the Exchange Act. 33 Under our proposal, a company's principal executive officer and principal financial officer each would have to certify in an annual report that:

-- he or she has read the report;

-- to his or her knowledge, the information in the
report is true in all important respects as of the
end of the period covered by the report; and

-- the report contains all information about the
company of which he or she is aware that he or
she believes is important to a reasonable investor
as of the end of the period covered by the report.34

The proposed certification also would contain a statement explaining that information would be "important to a reasonable investor" if:

-- there is a substantial likelihood that a reasonable
investor would view the information as significantly
altering the total mix of information in the report; and

-- the report would be misleading to a reasonable
investor if the information was omitted from the report.

The certification in a quarterly report would be similar, but would take account of the narrower disclosure required in these reports. Because quarterly report disclosure requirements include financial statements and management's discussion and analysis of financial condition and results of operation, the certification clearly addresses areas that we believe are important to investors.

I think these new rules, if implemented as described, would have quite a bit more "bite" than the previously issued order.

By the way, the comment period for the proposed rules is open until August 19. I strongly urge everyone to share their thoughts on these issues with the SEC.

Comments should be submitted in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. Comments also may be submitted electronically at the following electronic mail address: mailto:[e-mail]. All comment letters should refer to File No. S7-21-02; this file number should be included in the subject line if electronic mail is used. Comment letters will be available for public inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Electronically submitted comment letters will be posted on the Commission's Internet website ( http://www.sec.gov ).1

http://www.sec.gov/rules/proposed/34-46079.htm







Woof-woof!

(:

augie

[Sir Realist]

http://www.sec.gov/rules/other/4-460faqs.htm

[anyer]

Zeev, My thoughts about August 15 are that the corruption already seen in corporate America is more spread through the fabric of society. The corruption in the legal system has yet to be exposed. The CEO can just hire the best silver tongued lawyer as his stopgap and tie up any legal action pending transfer of assets to another jurisdiction. Knowing that you will probably not get more than 10 years in a sentence with a parole in the offing is a powerful motivator to continue busuness as usual.

So I agree that August 15 is more of a headliner. Until the legal system is reformed, any prosecutions and convictions will be strictly cosmetic for public consumption.

Anyer

[mlsoft]

"Well, crooks are going to find ways around that regulation as well, they got lawyers..." -- Zeev
==============
I agree - there are no incentives for a "dirty" CEO to come clean at this point. If one were to 'fess up and admit to misstatements, lies or otherwise "cooking the books", he would be subjecting himself to possible jail, an almost certain end to his business career, and possible loss of all his assets. Why not take the chance and try to work toward cleaning the books as fast as possible or just hope it is never discovered? If that did not work out, he would just use some defense on the order of "I am SHOCKED and OUTRAGED that this has happened without my knowledge......"

I think the exceptions might be with new CEO's like IBM or GE where they would not knowingly want to take on someone else's liability, or as in the case of the many companies that have dropped Arthur Anderson as their auditors and the new auditors want to clean the air and blame all the problems on Arthur Anderson. In either case the defense will be "THEY DID WHAT????? I CAN"T BELIEVE IT"

The problem of course is that those latter two possibilities cover a lot of companies that could foul the air with bad news over the next few weeks. I personally think that an even larger problem for the market going forward is that the "all is wonderful" guidance we are used to will turn significantly more negative, both from a deteriorating economy and from more honest and conservative company forecasts - for some, it will involve gradually cleansing the books.

Overall, aside from the initial "feel good" for the small investors, I see all of this as a longer term negative for the markets until all of the bad news is out and folks are more used to much more conservative reporting and estimates - that could take a while.

mlsoft