Opportunities for Improving the Quality and Efficiency of the Securities and Exchange Commission's Process for Reviewing Reports

FGMSD-80-81: Published: Sep 2, 1980. Publicly Released: Sep 2, 1980.

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A review was undertaken of the administrative procedures used by the Securities and Exchange Commission (SEC) in examining company reports to determine whether they comply with Federal legislation requiring them to send periodic financial disclosure reports to SEC.

While the number of statements and reports filed with SEC has increased dramatically over the last 10 years, the number of people reviewing the reports has been reduced. Consequently, SEC has decreased the number of thorough reviews and resorted to abbreviated reviews despite evidence calling for greater scrutiny of the reports. The annual 10K and 10Q reports, the key source for data used to assess a firm's financial condition, have been particularly subject to the shorter review. In addition, SEC has devoted increased staff time and computer resources to identifying and following up on firms which either did not file required reports or failed to file them on time. The staff was given little written guidance for reviewing reports. The adequacy of the reviews and the resulting analyses could not be determined.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: To improve the efficiency and effectiveness of SEC efforts to monitor whether companies filing reports under the securites acts are meeting disclosure requirements, the Chairman of SEC should: prepare more detailed guidelines telling the reviewing staff what vulnerabilities they should look for and what analysis they should make in reviewing reports; establish a quality review process to (1) check the adequacy of staff reviews, (2) see that the staff follows SEC guidelines, and (3) identify the need for new data and analysis and possible obsolescence of present data and analysis; investigate the benefits of using computers to assist in making financial analyses; improve the accuracy of computer files and delinquent report listings and eliminate unnecessary information from these listings; establish better procedures for following up on delinquent reports to minimize duplication; and evaluate the effectiveness of the delinquent reports program and the remedial action that SEC is taking against delinquent companies.

    Agency Affected:

 

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