Excerpt from: CREDO Action
Recently, news broke that the Obama administration would nominate law professor Lisa Fairfax to fill the Democratic seat on the Securities and Exchange Commission (SEC).1 This is a tremendous victory.
Reporters credit Sen. Elizabeth Warren and our progressive movement with scuttling the Obama administration’s plans to nominate a corporate defense attorney who would continue the revolving door between Wall Street and government.2
Our activism is yielding results – but we need to continue speaking up, because Mary Jo White’s SEC may now be on the verge of allowing Wall Street corporations to hide the truth about their financial health from investors.
The Financial Accounting Standards Board (FASB), a private group tasked by the SEC with setting accounting standards, recently proposed weakening the rules that govern what companies have to disclose to the SEC and the public.
The new proposal would let companies hide details of their financial health in order to goose their stock prices – allowing the same sort of behavior that led to the Enron and WorldCom collapse and the 2008 financial crash.3
Once again, the SEC appears to be siding with big banks over investors and Americans who count on a strong watchdog. We need to demand that the SEC reject these proposed rules and maintain the tougher current standards.
History is full of financial crashes and corporate meltdowns that occur when companies are able to hide their financial details from investors and the general public. Disclosure is supposed to be the core mission of the SEC, preventing companies from hiding costs or inflating gains in order to goose their stock price or appear more financially sound.4
Companies are currently required to disclose “material” details, but the new FASB rules would give them massive power to decide what is considered “material,” and thus what to disclose. The proposals would also set the bar for disclosure far higher, following guidelines from a 1990’s Supreme Court case over securities fraud.
But there is tons of information that investors may need to know that does not clearly rise to the level of fraud. And changing the standard from an accounting definition to a legal definition allows lawyers to step in and find new loopholes.5
As University of Denver law professor Jay Robert Brown, Jr. puts it, “This is anything but just a clarification. There’s no way this cannot be seen as an effort to reduce disclosure.”6
The decision likely goes right to the top of the SEC. Chair Mary Jo White has long called for “reforming” disclosure. Her husband, John White, a big-shot corporate lawyer and former anti-disclosure SEC staffer, recently sat on the FASB advisory board.7 Once again, Mary Jo White’s broken SEC is picking Wall Street over Main Street, and we need to speak up.
The SEC’s Chief Accountant, John Schnurr, has the authority to reject the FASB standards, but it won’t happen without a public outcry. Our allies at AFL-CIO say that Schnurr “seems to be engaged on multiple fronts to pull back on the information investors have access to and on accountability of companies for their financial reporting,” and he is reportedly close to John White.8,9
CREDO members are already speaking out to protect Americans from shady accounting practices. More than 62,000 of you have called for Chair White to recuse herself from picking the next head of the Public Company Accounting Oversight Board (PCAOB) because her husband’s firm was caught bragging about his role on the PCAOB’s advisory group.10
We are showing that no matter how complex the fight, CREDO members will not sit quietly while Mary Jo White’s SEC tilts the rules in favor of Wall Street banks – and we must keep up the fight.
- Tell the SEC: Don’t help Wall Street hide truth from investors. Petition to the Securities and Exchange Commission and Chair Mary Jo White:
- “Overrule the new materiality standards proposed by the Financial Accounting Standards Board, which would help Wall Street companies hide their spending from investors and increase the risk of an economic collapse.”
Click below to sign the petition:
Thank you for speaking out,
Murshed Zaheed, Deputy Political Director
CREDO Action from Working Assets
Aruna Viswanatha and Andrew Ackerman, “Law Professor, Ex-Senate Aide Nominated for Securities and Exchange Commission,” The Wall Street Journal, October 20, 2015.
Patrick Temple-West, “Warren allies delay Obama’s SEC pick,” Politico, July 7, 2015.
David Dayen, “Exclusive: Are the SEC’s Mary Jo White and Her Husband Teaming Up to Gut Corporate Disclosure and Make It Harder to Fight Fraud?” naked capitalism, October 18, 2015.
Francine McKenna, “Investor advocates protest proposals limiting disclosure,” Market Watch, October 19, 2015.
Dayen, “Exclusive: Are the SEC’s Mary Jo White and Her Husband Teaming Up to Gut Corporate Disclosure and Make It Harder to Fight Fraud?”
McKenna, “Investor advocates protest proposals limiting disclosure.”
“Tell SEC Chair Mary Jo White: Recuse yourself from picking auditor watchdog chief,” CREDO Action.
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