Analysis: SEC inquiries gather momentum

According to agency enforcement director Richard Walker, this is a big increase on recent years, and comes despite public companies being pushed to improve their financial reporting and avoid manipulating their earnings to meet analysts’ projections.

Of the 200 plus investigations currently underway, roughly 100 are being conducted by SEC attorneys and examiners. At least 15 of these investigations involve ‘big corporations’, although the SEC has declined name any of the companies currently under inquiry.

Worryingly, an ‘alarming shift’ has been noticed amongst the cases of fraudulent reporting, Walker said historically the problem had largely been confined to smaller companies, but has now reached Fortune 500 companies, America’s biggest corporations.

Industry giants such as Sunbeam and Big Five firm Andersen have been heavily fined in cases relating to accounting and financial disclosure and the SEC’s enforcement efforts have drawn the attention from both sides of the political fence.

Republican representative Richard Baker, chairman of the House Financial Services subcommittee on capital markets, said he planned to ask acting SEC head Laura Unger about the growing problem of accounting fraud at a hearing on Friday.

Meanwhile, John LaFalce, a senior Democrat on the Financial Services Committee called for an investigation ‘into the increasing incidences of fraud in the markets’. At the same time, LaFalce acknowledged that the pressure on companies to manipulate their financial results had increased tremendously as more and more ‘average Americans’ chose to invest in stocks.

But, the SEC’s drive to end financial reporting fraud may be curtailed if Harvey Pitt assumes control of the regulator. Pitt’s appointment is still to be approved by the US senate, but president George W Bush’s has said he plans to impose budgetary constraints on the SEC.


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