SEC Rules Would Prevent Firms From Hiding Debt

Sunday, 12 Sep 2010 12:52 PM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

U.S. regulators will vote this week on rules that may make it harder for companies to mask debt after Lehman Brothers Holdings Inc. was accused of misleading investors by temporarily moving assets off its books.

Securities and Exchange Commission members will meet Friday to consider expanding what firms must disclose about their “short-term borrowing,” the agency said on its Web site. Commissioners will also vote on whether to issue guidance to help companies assess whether they are adhering to disclosure rules for “liquidity and capital resources,” the SEC said.

SEC Chairman Mary Schapiro in April said the agency would review whether new rules are needed to prevent banks from using accounting maneuvers to reduce borrowing at quarter-end when they have to reveal debt levels to investors. The agency was concerned that companies were boosting debt after quarterly reports, giving investors a misleading impression, she said.

Lehman filed the biggest bankruptcy in history on Sept. 15, 2008, exacerbating a global credit crisis following the collapse of the U.S. mortgage market. Bankruptcy examiner Anton Valukas wrote in a March report that New York-based Lehman tried to hide its true financial picture by moving $50 billion of assets off its books and accounting for the transactions as sales.

Lawyers for former Lehman Chief Executive Officer Richard Fuld said he didn’t know about the transactions or how the accounting was done. Spokesmen for Ernst & Young LLP have said the Lehman financial statements it audited were in compliance with accounting rules.

SEC Letters

The SEC sent letters to 19 financial companies in March to ask about their use of so-called repurchase agreements, in which firms contract with outside parties to sell assets and buy them back later. Lehman improperly accounted for some repurchase agreements as sales, instead of financings, giving investors the impression it had removed assets from its books, Valukas said.

While banks are required to disclose their average short- term borrowings in annual reports, they have no obligation to do so quarterly. Banks are only obligated to disclose their maximum month-ending and quarter-ending debt levels once a year. Non- banks don’t have to reveal average borrowings.

Any rules proposed at the SEC’s meeting this week would be subject to public comment by companies and investors. After SEC staff members review the comments, the regulations would require a second vote by agency commissioners before taking effect.

© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Bass: World's Central Banks Are Going Their Separate Ways

Wednesday, 22 Oct 2014 20:51 PM

Central banks, which have been easing in unison since the financial crisis began six years ago, are now starting to brea . . .

Goldman Sachs Tells Court: 'We're No Boys Club'

Wednesday, 22 Oct 2014 18:11 PM

Goldman Sachs Group on Wednesday attacked evidence offered by attorneys for former female employees in a U.S. federal se . . .

Stocks Decline Amid Price Data as Oil Tumbles to 2-Year Low

Wednesday, 22 Oct 2014 17:06 PM

U.S. stocks dropped, halting a four-day rally, while the dollar advanced as the cost of living in America unexpectedly r . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved