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| 2002 News and Press Releases |
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HEADLINE ARCHIVED:
A Kinder, Gentler SEC? NOT! SEC Chairman Proposes Several Initiatives In Wake Of Enron
By: Ivan B. Knauer
Electronic Banking Law & Commerce Report. March 2002
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Excerpt: Harvey Pitt said it. I just reported it. That's my story, and I'm sticking to it. As you read here in this past December-January issue, Mr. Pitt, the then-newly-minted Chairman of the SEC, announced shortly after his confirmation by Congress that he wanted his Commission to foster a more constructive dialogue with the accounting profession than had existed in the past. As Mr. Pitt put it at the time, he wanted to "approach this new era with a spirit of civility and cooperation that impel all of us to a higher ground." [n1] Mr. Pitt took some flak for this sentiment because of his prior life as a securities lawyer who represented, at one time or another, all of the accounting firms represented in the current "big five." He seemed willing, however, to stick to his guns, expressing the apparent belief that you catch more flies with honey than with vinegar. Then came Enron. The "Enron debacle" (again, Mr. Pitt's words, not mine) raises two overarching issues: The first issue is figuring out who did what, when, and how they should be punished. [n2] Rest assured that the Enforcement Division is diligently investigating the situation to answer those questions. Regardless of how that investigation ends up, it seems apparent that the Commission will be looking to flex its muscles on this one. [n3] It is unlikely that the Commission will be looking to cut deals or give anyone credit for cooperating. In this respect, I think that the "kinder, gentler" approach is on vacation, at least for the time being. The second issue is how the Commission makes sure that something like Enron does not happen again. The Enron implosion has motivated the SEC Chairman and staff to propose a raft of new ways to deal with old problems. According to Mr. Pitt, the Enron situation has exposed several "systemic problems that need repair," including an outdated disclosure model, unclear financial statements designed to protect against liability rather than to inform, auditors and analysts with conflicts of interest, and ineffective audit committees. [n4] The Commission is working to remedy these problems, and is taking the opportunity while Enron is still front-page news to push for "initiatives to improve and
modernize our current disclosure and regulatory system." [n5]
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