X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The government moved closer Wednesday to requiring faster and broader disclosure of company changes and to having CEOs personally vouch for the accuracy of financial reports. The Securities and Exchange Commission voted to open the proposals — inspired by the collapse of Enron Corp. — to public comment for 60 days. They could become final after that. Companies also would have to report important changes in their operations much faster and report a wider group of changes under the new rules tentatively approved by the SEC. The ”8-K” form for reporting significant events or corporate changes would have to be filed with the SEC within two business days, rather than the current requirement of five days for some types of information and 15 days for others. The SEC acted as the latest drama involving alleged corporate malfeasance unfolded. FBI agents arrested the former chief executive of ImClone Systems, Samuel Waksal, at his home in New York City. He was charged with conspiracy to commit securities fraud for allegedly tipping off two people to sell stock in the biotech company the day before the Food and Drug Administration rejected its application for a cancer drug. SEC Chairman Harvey Pitt said before the vote it was impossible to know whether the requirement for corporate chief executives to personally certify financial reports could have prevented the Enron debacle. Still, he said, “If we don’t learn from history, we’re doomed to repeat it.” “This is not a time to be stingy with our regulatory responses to some of the chicanery and fraud” that appear to have occurred at several publicly traded companies, Pitt said. Said Cynthia Glassman, another commissioner: “I don’t think this should be a problem for a well-managed company.” Many investors have been unnerved by Enron’s collapse and distrustful of the accuracy of the financial reports of big companies, contributing to a volatile stock market also roiled by sluggish earnings and terrorism fears. A broad sell-off Tuesday sent the major market indices to their lowest closes of the year. Among the new items that would have to be reported in the 8-K: The sort of off-balance-sheet transactions that helped topple Enron; unexpected departures of top executives, senior managers or directors; defaults on company debt; and so-called “lock-out” periods during which employees are barred from selling company stock from their retirement accounts. At Enron, many employees whose 401(k) plans were heavily invested in company stock lost their retirement savings when its value plummeted last year and they were prohibited from selling it during a period last fall. Enron, the energy-trading giant that slid into the biggest corporate bankruptcy in U.S. history in December, used a web of thousands of complex partnerships to hide more than $1 billion in debt from investors and the SEC. Its longtime auditors, the Arthur Andersen accounting firm, blessed the company’s financial statements. Jurors in Andersen’s trial on a federal charge of obstructing justice for destroying Enron audit documents deliberated for a seventh day Wednesday. In March, with the Enron affair threatening to inflict political damage on the White House, President Bush proposed having company executives personally certify financial reports as part of a package of measures designed to enforce corporate and auditor responsibility. He also said the government should strip top executives of ill-gotten bonuses and tighten oversight of the accounting industry. The rules put forward Wednesday by the SEC would require chief executive officers and chief financial officers to certify that all the information in the company’s annual and quarterly reports is correct and that the reports include everything that “a reasonable investor would consider important.” The executives would have to affix their signatures to the reports and would be subject to potential enforcement action by the SEC or lawsuits filed by company shareholders. Copyright 2002 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.