Time To Fine The SEC

Guess what company has screwed up its accounting for the past seven years in a row? Actually it’s even worse than that. They’ve screwed up basic tasks like tracking income.

You’d probably think the SEC would be all over them. Yeah…about that.

“A reasonable possibility exists that a material misstatement of S.E.C.’s financial statements would not be prevented, or detected and corrected on a timely basis,” the auditor concluded.

The auditor did not accuse the S.E.C. of cooking its books, and the mistakes were corrected before its latest financial statements were completed. But the fact that basic accounting continually bedevils the agency responsible for guaranteeing the soundness of American financial markets could prove especially awkward just as the S.E.C. is saying it desperately needs money to increase its regulatory power.

Like the rest of the federal government, the S.E.C. is operating without an increase in its budget, which was $1.1 billion last year. With President Obama talking about extending the freeze and lawmakers continuing their criticism of its embarrassing performance before the financial crisis, the agency’s prospects for more money appear bleak.

That has ominous implications for investors. The S.E.C.’s technology systems, for example, lack the ability to perform sophisticated analysis of large batches of financial material. As a result, a Congressional report says, S.E.C. analysts sometimes resort to printouts, calculators and pencils. While investigating the “flash crash” of May 6, 2010, S.E.C. computers were so strained by the crush of data from just one day of trading that it took three months to figure out what had happened.

Posted by on February 3rd, 2011 at 7:52 am


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