Presidents Ten-Point Plan
- Each investor should have quarterly access to the information needed to judge a firms financial performance, condition, and risks.
- Each investor should have prompt access to critical information.
- CEOs should personally vouch for the veracity, timeliness, and fairness of their companies public disclosures, including their financial statements.
- CEOs or other officers should not be allowed to profit from erroneous financial statements.
- CEOs or other officers who clearly abuse their power should lose their right to serve in any corporate leadership positions.
- Corporate leaders should be required to tell the public promptly whenever they buy or sell company stock for personal gain.
- Investors should have complete confidence in the independence and integrity of companies auditors.
- An independent regulatory board should ensure that the accounting profession is held to the highest ethical standards.
- The authors of accounting standards must be responsive to the needs of investors.
- Firms accounting systems should be compared with best practices, not simply against minimum standards.
- On July 9, 2002 the President called on Congress to give the Administration new powers to enforce corporate responsibility and to improve oversight of corporate America, including:
- Tough new criminal penalties for mail and wire fraud
- Strengthened laws to crack down on obstruction of justice
- New authority for the SEC to freeze improper payments to corporate executives when a company is under investigation.
- Also on July 9, 2002, the President, by Executive Order, created the Corporate Fraud Task Force. Headed by Deputy Attorney General Larry Thompson, the Task Force includes, among others, US Attorneys, the FBI and SEC to oversee the investigation and prosecution of financial fraud, accounting fraud and other corporate criminal activity, and to provide enhanced inter-agency coordination of regulatory and criminal investigations.
- On July 30, the President signed the Sarbanes-Oxley Act of 2002, the most far-reaching reform of American business practices since the time of Franklin D. Roosevelt. The legislation included action on all of the Presidents proposals, and gave important new tools to prosecutors and regulators to improve corporate responsibility and protect Americas shareholders and workers. Among other reforms, the legislation:
- Created a new accounting oversight board to police the practices of the accounting profession
- Strengthened auditor independence rules
- Increased the accountability of officers and directors
- Enhanced the timeliness and quality of financial reports of public companies
- Barred insiders from selling stock during blackout periods when workers are unable to change their 401(k) plans.
- Since that time, substantial additional progress has been made to achieve each of the Presidents goals:
- The Securities and Exchange Commission has hired 50 new personnel to help fulfill its mission to enforce the securities law. And significantly more help is on the way.
- The SEC required the CEOs and CFOs of the largest 947 public companies to personally certify the accuracy and fairness of their companies public filings through the prior fiscal year. The overwhelming majority of executives successfully filed their personal certifications. Going forward, all public filings will require CEO and CFO personal certifications. This should help restore accountability and responsibility to corporate suites and boardrooms.
- Complementing the SECs efforts, many corporations, investor groups and others in the private sector have responded to the Presidents call for reform by re-evaluating their own corporate governance practices. For example, at the Presidents urging, the New York Stock Exchange and NASDAQ have taken meaningful steps to revise their listing standards.
The Corporate Fraud Task Forces Record of Accomplishment
- The Justice Department, SEC and other Task Force members have aggressively responded to the Presidents call to action. Enron, Worldcom, Adelphia and ImClone are among the cases that are being overseen and directed by members of the Corporate Fraud Task Force.
- Since the Task Force was formed in July 2002, investigations have begun into more than a hundred new corporate fraud cases.
- More than 150 defendants have already been charged with civil and/or criminal wrongdoing.
- Convictions have been obtained or pleas are pending in 46 cases.
- Enhanced coordination among civil and criminal authorities is bringing about significant increases in real-time enforcement.
- Since the Task Force was created, fully 90% of the prosecutions brought by DOJ for corporate fraud offenses were accomplished with the active assistance of SEC investigators and analysts.
Department of Justice Accomplishments
- Since the beginning of the Administration, the Department of Justice has initiated investigation into more than 400 matters involving possible corporate fraud including falsification of corporate financial information, self-dealing by corporate insiders and obstruction of justice related to these offenses.
- During the same period, more than 500 defendants have been charged with corporate fraud-related offenses. Convictions have been obtained or pleas are pending in more than 200 cases.
- Fiscal year to date, the SEC has filed a record 156 actions for financial reporting and issuer disclosure violations, 51 percent higher than were filed in all of fiscal 2000.
- During this same period, the SEC has sought to throw 107 unfit officers and directors out of corporate boardrooms almost 3 times the number that were sought in fiscal 2000. As the President stated in his Ten Point Plan in March, corporate officers and directors must assume personal responsibility for their companies financial statements.
- The SEC is aggressively using its enforcement powers to make corporate wrongdoers accountable for their actions. During this fiscal year to-date, the SEC has sought to recover compensation, bonuses and stock options paid to 25 corporate wrongdoers that is 39% more than in the prior fiscal year.
- The SEC has sought temporary restraining orders, seeking immediate relief to prevent irreparable harm to investors, in 47 cases since the start of this fiscal year, and has sought 57 asset freezes to prevent dissipation of assets that may be used to compensate defrauded investors. Both of these figures reflect more than a 30% increase over fiscal year 2001.