FOR IMMEDIATE RELEASE
Wednesday, March 11, 2020
Contact: Press at press@bettermarkets.com
Washington, D.C. – Lev Bagramian, Senior Securities Policy Advisor of Better Markets, issued the following statement in advance of the Securities and Exchange Commission’s (SEC) final rule rolling back Sarbanes-Oxley’s 404(b)’s requirement that auditors attest to the adequacy of certain companies’ internal controls:
“Today’s SEC actions again favors corporate interests at the expense of shareholders, retirees, and the integrity of our capital markets. Nothing focuses a corporate executive’s attention like having to personally certify that their financial statements are materially accurate and internal controls adequate because such certifications create personal liability and significant reputation risk for that executive. Hundreds of studies have shown that independent audits serve as an early-warning mechanisms to these CEO certifications. And without these independent audits, self-certifications remain unchallenged and overtime lead to deterioration of quality of financial reporting. These rules were enacted by Congress in response to the massive frauds at Enron and WorldCom, which cost investors tens of billions of dollars. The rules were meant to hold executives accountable when their companies ‘cook their books’ and engage in financial fraud.
“Current data—available to the SEC—show that companies that are not required to obtain independent auditors’ attestation of the executives’ certifications have higher likelihood of fraud, lower quality of financial reporting, and generally create less value for their shareholders. That’s why today’s action by the SEC is so important and harmful to investors.
“Adding insult to investor injury, the SEC—statutorily required to protect investors—is engaging in this significant policymaking by cutting procedural corners. Instead of finalizing these extremely important and harmful rules in the transparent and traditional “Open Meeting” process—during which the Commissioners and staff would have to defend their positions—the Commission has chosen instead to follow a secretive vote process. While the coronavirus must be taken seriously and may unavoidably affect the agency’s operations, it doesn’t excuse the SEC’s decision to operate in the shadows when it comes to significant policymaking. Today’s deeply regrettable decisions must be undone by a future Commission.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.
