Latest in “Race to the Bottom” by Securities Regulators: Relaxed Accounting Procedures for Foreign Issuers

The Securities and Exchange Commission has published a 121-page proposal for dropping the requirement that non-U.S. companies reconcile to the generally accepted accounting principles (GAAP) as required by U.S. firms in financial reports.

The proposal would apply to foreign private issuers that file financial statements to comply with the English language version of IFRS as published by the International Accounting Standards Board. “The Commission has taken a significant step on this important policy matter that was outlined in the ‘Roadmap’ announced in 2005,” said Conrad Hewitt, the SEC chief accountant.

“Along with the Commission’s work relating to internal control reporting and deregistration, this proposal to accept financial statements prepared in accordance with IFRS as published by the IASB without a US GAAP reconciliation represents another significant action to tailor the regulatory environment for foreign companies in the U.S. public capital markets,” said John White, director of the SEC’s Division of Corporation Finance.

This latest move in the “Race to the Bottom” in securities regulation is in response to fear mongering by Wall Street interests. They claim the U.S. will otherwise lose the battle for listing shares and say our nation is on the brink of disaster, since it can not compete with foreign markets with little oversight. This is notwithstanding a multitude of scandals on Wall Street in the past few years, and while record profits are being earned by the perpetrators.

The strictest securities regulation in history began in the U.S. about seventy-five years ago. This came after the stock market crash of 1929, which sent this country into a tailspin followed by the depression years of the 1930’s. Since then, under those regulations, the U.S. economy and capital markets have boomed and become the envy of the world. Yet, to listen to Wall Street, such regulation will soon be our downfall.

Conventional wisdom has held that investors prefer investing into companies and markets which have regulations. The new un-conventional theory is that lawless oversees markets will rob the U.S. of its financial markets. Or could there be a different motive? If we continue to remove restrictions on Wall Street, its participants will not have to worry about behaving – or even paying token fines if caught.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, hiring an experienced law firm can increase your chances of recovery. Contact us to arrange a free consultation with one of our attorneys.

Related Web Resource:

Text of SEC Reconciliation Elimination Proposal