Tags: Higgins | Sherman | corporate | finance

House Financial Services Subcommittee Oversees SEC's Corporation Finance — Part I

By    |   Tuesday, 29 Jul 2014 07:22 PM

This writer has observed before that the Securities and Exchange Commission (SEC) is like a federation of feudal duchies with a state religion whose clergy dispense indulgences, often at a high price.

Having recently held an oversight hearing on the Division of Trading and Markets, the House Financial Services Committee's Subcommittee on Capital Markets and Government Sponsored Enterprises, chaired by Rep. Scott Garrett, R-N.J., returned to SEC oversight on July 24, this time to look at the Division of Corporation Finance, whose director, Keith Higgins, served as the only witness at an intense, two-hour hearing.

This first article will summarize the hearing, and the next installment will take a closer look at a specific matter that provides more insight into how the SEC operates.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

In his opening statement Garrett praised the SEC, which is supposed to be a "disclosure-based" agency, for addressing the problem of "disclosure overload" and thereby unlocking some value for investors by curbing the power of activist investors to engage companies on their issues. For example, the agency has clarified the role of proxy advisory firms and the fact that institutions do not have to vote on every issue or take the advice of the firms on every issue.

Garrett and other Republicans criticized the SEC for moving slowly to implement the Jumpstart Our Business Startups (JOBS) Act's provisions to expand the range of investors who can be solicited but also attaching more conditions than proponents expected. They would also like the Commission to adopt a more expansive definition of "accredited investor" that would allow consideration of factors other than net worth.

Higgins' responses to members seeking to pin him down on the SEC's plans for even the rest of this year bordered on passive-aggressive. Sometimes he referred them to his many colleagues if the issue didn't fit squarely within the jurisdiction of Corporate Finance.

Then there was a classic exchange with Rep. Brad Sherman, D-Calif., who probed to determine when the SEC would produce a regulation on the complicated provision of Dodd-Frank that requires companies to disclose the ratio between the salaries of their top executives and average workers. This is proving to be a difficult chore, and Sherman and others would like some tolerance in the precision in order to reduce the cost.

In an insistent tone, Sherman asked, "When are you going to get the job done on the pay ratio?" Higgins responded: "I don't control the agenda." Sherman then repeated, "When will it get done?" Higgins: "I don't have an estimate."

Sherman then switched to another matter that he has persistently raised at recent hearings. The Financial Accounting Standards Board (FASB) is an independent arbiter of accounting standards, but once it issues them, they fall under the jurisdiction of the SEC.

FASB has been working on a controversial standard regarding lease accounting that the real estate industry charges would expand their balance sheets by $2 trillion and cause them to violate longstanding covenants with their lenders.

Higgins told the congressman this issue falls under the Office of the Chief Accountant. Sherman shot back: "Do you have one?" Higgins: "He's announced that he's leaving."

(Archived video, the staff memorandum and witness testimony can be found here.)

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
Robert-Feinberg
This writer has observed before that the Securities and Exchange Commission (SEC) is like a federation of feudal duchies with a state religion whose clergy dispense indulgences, often at a high price.
Higgins, Sherman, corporate, finance
556
2014-22-29
Tuesday, 29 Jul 2014 07:22 PM
Newsmax Inc.
 

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
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved