To Whom It May Concern:
I have reviewed the SEC's proposed rule regarding certification of disclosure in companies' quarterly and annual reports, as well as the text of the Sarbanes-Oxley Act of 2002, and welcome the opportunity to comment.
Following the insider trading scandals of the 1980s, I published an article in the Columbia Business Law Review examining the proposals for substantive reform of the securities laws and enforcement of U.S. securities laws regarding off-shore issuers, several of which were subsequently adopted. What we learned in the late 1980s still applies in 2002. We must avoid the twin evils of over-regulation and under-regulation. Government must protect investors from structural conflicts of interest and corporate con-artists while not overly burdening the country's financial markets.
The question remains-- What can be done to protect individual investors, and restore confidence in our financial markets? American investors are perplexed by the failure of our legal system to detect and punish the corporate con-artist, whose malfeasance diminishes their savings, to the same extent as the street corner grifter who cons the elderly out of their retirement savings. Currently there are no signs that read "The Buck Stops Here" over the doors of corporate decision-makers. The vast majority of corporate officers and directors are honest and ethical, however, without this sense of individual accountability, it is no wonder that a minority of executives have continually managed to evade responsibility for acts of malfeasance. The new rule requiring the chief executive officers of corporations to personally attest to the accuracy of their companies' earnings statements will go a long way toward ensuring that someone will be held accountable in cases of fraud and abuse. Honest and ethical officers have nothing to fear from this rule.
Another crucial step is to require corporate officers and directors to provide swift public notice of sale of stock or exercise of options. The current disclosure rules originated in the days of snail mail and have been shown to be useless in protecting investors. Since all public companies are now required to electronically file their periodic reports with the SEC, the requirement of swift reporting will not be an unreasonable hardship. This simple step will potentially save countless small investors from the hardships faced by the rank-and-file employees of Enron, some of who lost their entire life savings-- in part because information regarding executive sales of stock was kept from them. How the investor chooses to respond to the disclosed information will still be up to the investor and his or her advisors.
While American investors do not expect the SEC to ensure against the ebb and flow of the market or the failure of a particular business entity, they do want the SEC to take a stronger stand against the fraudulent acts covered by (ocb) (5) of the Securities Act. The proposed regulations strengthen our system of disclosure.
The foregoing certification and disclosure requirements should apply to the broadest range of corporations. That is why I applaud the SEC's decision to adopt the provision of the Sarbanes-Oxley Act that requires foreign private issuers to adhere to the new certification requirements. In addition to expanding protection for individual investors, this provision is important for another reason. Recently it has come to light that many American corporations have incorporated overseas in an attempt to evade regulation. The principles involved in the re-incorporation issue are the same as those involved in the issue of disclosure. Any step that we take to ensure that those who benefit from the virtues of the U.S. markets also adhere to our values is crucial in maintaining the integrity of, and confidence in, American financial markets. Any contrary decision makes the U.S. a contestant in the race for the bottom.
America's corporations have aided in our country's unprecedented prosperity, and it is important that America's citizens trust in them so that they can continue to do so.
Candidate for Congress