Statement by SEC Chairman:
Remarks at the Commission Open Meeting
Chairman Harvey L. Pitt
U.S. Securities and Exchange Commission
October 16, 2002
Approximately a year ago the corporate malfeasance and financial mismanagement at Enron was just coming to light. In the year since, tremendous strides have been made to reform the regulatory system and bolster investor confidence. Today we meet to propose significant new rules pursuant to the Sarbanes-Oxley Act. But before reaching these rule proposals, I want to take a moment to reflect on the accomplishments of our staff in the past year.
We've brought a record number of enforcement actions, including actions against former Enron CFO Andrew Fastow, Michael Kopper, Tyco CEO Dennis Kozlowski, Adelphia management, WorldCom, former ImClone CEO Sam Waksal, and the list goes on, unfortunately. To paraphrase a well-used phrase of former SEC Chairman John Shad, the Commission has been coming down on financial fraud with hobnail boots, and of course we will continue to do that.
We have also taken the initiative in reforming our corporate disclosure system, including adopting rules accelerating periodic filing deadlines, accelerating reporting of transactions by company insiders, and we've required CEOs and CFOs to certify their companies' results.
We have many more proposals in the works, including outstanding rule proposals regarding disclosure of companies' critical accounting policies, and expanded lists of current disclosures on Form 8-K. We have also been working closely with the FASB to address key issues in a timely manner, and we ourselves have undertaken a review of the annual reports of all the Fortune 500 companies.
It's no exaggeration to say there's been a change of revolutionary proportions in the way our markets are being regulated, our public companies are disclosing the results of their operations, and the accounting profession performs its assigned public responsibilities. The Division of Corporation Finance has done a remarkable job in the short time since Sarbanes-Oxley became law to come up with rules for CEO and CFO certification, and today rules are being proposed requiring disclosure of whether a company has a code of ethics for senior financial officers and standards for immediate disclosure of substantive changes in that code.
Additional rules are being proposed requiring any public company to disclose whether its audit committee has at least one member who can accurately be described as a financial expert. Our Office of the Chief Accountant has worked on proposed rules covering improper influence on audits to prevent financial statements from being rendered misleading.
All of this is obviously aimed at restoring investor confidence, and assuring public investors who are so crucial to our markets that their interests will be protected, and that those who manage public companies will be held accountable.