Corporate & Securities Law

The SEC’s accounting problems

The SEC is charged with the responsibility of making sure that companies that are raising money tell the whole truth about their finances.

But the NYT reports that the SEC, which is seeking money from Congress, is having problems with disclosing its own finances: 

Last November, the G.A.O. said that the commission?s books were in such disarray that it had failed at some of the agency?s most fundamental tasks: accurately tracking income from fines, filing fees and the return of ill-gotten profits. ?A reasonable possibility exists that a material misstatement of S.E.C.?s financial statements would not be prevented, or detected and corrected on a timely basis,? the auditor concluded.

* * * [T]he fact that basic accounting continually bedevils the agency responsible for guaranteeing the soundness of American financial markets could prove especially awkward just as the S.E.C. is saying it desperately needs money to increase its regulatory power. * * *

The latest inquiry is the second investigation of the S.E.C.?s leasing practices in a year. Last September, H. David Kotz, the inspector general, reported that a lack of adequate policies led the agency to make lease payments that could have been avoided, including more than $15 million for space in Manhattan that no S.E.C. employees have occupied in the last five years. * * *

Lease payments also figured in the G.A.O.?s assessment of the agency?s financial reporting. The auditor found that the agency, in a preliminary version of its annual report, had understated its lease payments by $40 million.

Meanwhile, the SEC is risking a Constitutional confrontation by slamming down on companies truthful statements while it’s missing huge fraud under its nose.

Full post as published by Truth on the Market on February 03, 2011 (boomark / email).