Regulatory Path Dependency in Securities Regulation: Evidence from Israel and U.S.

The Rise and Fall of the SEC in Bankruptcy

Fairness and the SEC's Competing Regulatory Paradigms

The political nature of accounting standard setting is becoming increasingly apparent. Both professional and academic journals have discussed the political characteristics of the environment in which the Accounting Principles Board (APB) and the Financial Accounting Standards Board (FASB) have functioned (see, for example, Horngren [1973], Meyer [1974], May and Sundem [1976], Armstrong [1977], Rockness and Nikolai [1977], Ronen and Schiff [1978], Solomons [1978], Newman [1981], and Brown [1981]). One feature of this environment which has been given little specific attention is the influence of the Securities and Exchange Commission (SEC) (vis-A-vis the APB or the FASB) on the process of selecting accounting standards. The Metcalf staff report (U.S. Congress [1976]) critically evaluates the existing approach of the SEC to the accounting policy process [1976, pp. 17-18]: Congress gave the SEC broad authority to establish accounting and reporting standards as part of its mandate to administer and enforce the provisions of the Federal securities laws. Soon after its creation, the SEC decided by a vote of three to two votes not to exercise its authority to set accounting standards. Instead, the SEC decided to rely on accounting standards established in the private sector as being protective of the public interest, as long as such standards have substantial authoritative support. In effect, the SEC has delegated the establishment of accounting standards which are binding on all publicly-owned corporations to the special interest groups which control the FASB, and has reserved a mere oversight role for itself. The Metcalf staff thus implies that the SEC has not satisfied its public responsibilities since private-sector boards control the initiative in standard setting.

I know that I don't have to tell you that the Commodity Futures Trading Commission has been extraordinarily busy in its efforts to fulfill the regulatory mandates of the Dodd–Frank Wall Street Reform and Consumer Protection Act. As of May 2011, the CFTC has put forth 66 proposed and final rules under the Dodd–Frank Act (DFA). Not even counting the last four rule proposals the CFTC voted on, we're at over 1,046 dense Federal Register pages filled with legal jargon and regulatory requirements. If you were to run the comment periods on all of those proposals consecutively, it would take 2,964 days, or a little over 8 years. I doubt I have to give those numbers much context; they speak for themselves. But just for fun, if you were to lay each of those Federal Register pages end to end, they'd stretch two-thirds of the way up the newly renamed Willis Tower in Chicago. And we're not done yet, so I am sure we'll reach the top of the tower before this is all over.

Good business planning and competitive strategy require you to look into the future—to determine what your competitors, customers and suppliers are going to do. In industries where there is a long development cycle and change is cumbersome, your forecast should reach several years into the future. For more dynamic industries, the meaningful future may be less than a year ahead. Too often businesses concentrate on historical rather than prospective business actions. A good example of this is in competitive benchmarking. When companies concentrate their efforts on what their most successful competitors did yesterday and are doing today, they are aiming short. By the time they emulate the companies they are benchmarking against, those companies have moved ahead, maintaining their lead. Only by anticipating the future actions and capabilities of leading companies can you take timely action and leapfrog into positions of superiority. Predicting a company's future actions is an inexact art. No one has a crystal ball that provides the answers. In fact, not even your target company knows its future. You can make the best possible forecasts by approaching the challenge from four directions and integrating your results. Invest the time to examine the following: What the target company forecasts for its future. What industry experts and participants forecast for your target, including both what it can do and what it will choose to do. What the company's past and present actions presage for the future. How the company's industry and competitive environment are likely to affect its future. In this article and the next are strategies for examining these directions. Every company reveals its plans in some ways. Most announce their intentions through a variety of vehicles, some entirely voluntary and others required by law. Some revelations are oral and others are buried in reports. Still others are reported through third party vehicles, such as the press. First look for situations in which the company is selling itself: • Annual reports to stockholders. The annual report is not only an accounting to stockholders but also a sales document for current and potential stockholders. Consequently, the report includes some information about plans for future activities and their likely effect on the company. First look at the president's letter, which will be in the first few pages of the report. Then skim the text of the report looking for signs of expected developments. You can geta free copy of the annual report from the stockholder relations office of almost any public company. • Registration statements. Registration statements to the Securities and Exchange Commission (SEC) also function as promotional brochures for prospective stockholders. Every time a public company offers securities, it must file a registration statement. This statement contains all the sales features that will appear in the final prospectus; detailed information about marketing agreements; subsidiaries of the registrant, franchises and concessions; and financial statements and exhibits. If your target company doesn't file at the SEC, it may file with a state securities office. Ask that office for both registration statements and prospectuses. • Professional meetings. It's likely that your target company's executives, managers and professionals speak at meetings of their peers. There are professional associations for marketers, planners, engineers, competitive analysts and virtually any other group you can think of. Most have meetings at which members present papers and answer questions from the audience. It is very common for speakers to reveal information not only about the past, but also about the future of their companies. The revelations often exceed good judgment, as the speakers warm up to their topic and their audience. You'll want to be in the audience if at all possible. Otherwise, purchase tapes or published proceedings of the conference. • Trade shows and exhibits. Your target company's representatives almost certainly participate in industry-related trade shows and exhibits. They may sponsor booths or hospitality suites, make presentations or appear on panels. In suchcases the company representatives often disclose valuable information as they seek to impress the company's excellence upon the audience. • Financial analysts meetings. High level executives of public companies regularly address gatherings of financial analysts throughout the country, hoping to convince them to promote the company's stock. Dozens of these gatherings are sponsored each month by the Financial Analysts Federation, part of the Association for Investment Management and Research (AIMR). When you spot a meeting where your target company's executive will speak, you can plan to attend the meeting, purchase audio tapes or wait for the proceedings of the meeting to appear in Wall Street Transcript. This publication is available in many libraries. • Congressional hearings. When Congress is considering legislation that affects industry, from trade issues to technology to toxic substances, company executives often testify either in person or through written submissions. In selling their company's or industry's point of view, these executives are often generous with information about their own company's activities, objectives and goals. CIS Reports, found in many libraries, indexes testimony by executive and company name. • Community meetings. Every company or business, no matter how small or how deeply buried within a corporate structure, is closely monitored by a collection of organizations and individuals. Every company and business is a big fish in some pond. Executives, who would never testify before Congress or speak to financial analysts, are hot tickets at local and civic club luncheons. Company representatives, who would not be given a place on the agenda of the national trade meeting, may keynote a forum sponsored by the local board of trade. These presentations often deal with what the company is planning that will benefit the community. Keep up with the community circuit by reading the local newspaper and getting on the mailing lists of as many promising regional organizations as you can manage. Concentrate on those organizations that are concerned with the future development of the community and your target's corresponding role. • Press quotes. When you find articles in trade, regional or business press about your target company, search for references to company personnel who were sources for the article. If they spoke with the press, they will almost certainly be willing to talk with you. Call them directly and interview them adroitly about their views on company plans. • Government regulators. Another way to discern company plans is to sleuth through the company filings required by government regulators. Various levels of government require companies to file information that reveals direct insights into their plans. There are two types of federal and state regulators that may require your target company to file information about its plans: Industry regulators. If the government regulates your target company's industry (transportation, telecommunications, food, drugs, agriculture and mines are a few of the many industries heavily regulated),you'll find some interesting revelations about business plans in the required filings. The best filings to look for are annual reports submitted to the regulators. (Don't confuse them with the 10-K filed at the SEC or the annual report to stockholders.) Permit applications are also good sources. They generally relate to new products or services that the company wants to provide, but they may also cover items such as packaging, delivery modes and markets. Some industries, such as insurance and banking, are regulated predominantly at the state level. Other industries, such as agribusiness, pharmaceuticals and mining, are regulated by the states where they are important industries. Function regulators. Some federal and state regulators monitor specific business functions, regardless of industry. Information filed with or collected by these offices often provides detailed explanations of business plans. For example, environmental regulators receive applications for permission to build or expand facilities years before those facilities are built. Occupational health and safety regulators often know about proposed changes in the workplace, manufacturing technology and personnel long before they take place. Local regulators may also be helpful. Talk to the office of the mayor city commissioner to learn about local regulatory filings or studies that may provide information about local companies' plans and intentions. Look for harbingers of future developments. These include zone change applications by your target and municipal bond offerings to improve road access to your target's facility. It's useful to learn what a company professes or hints about its plans, but you shouldn't stop there. It's important to have the perspective of people and organizations not affiliated with the company but interested in its activities. The following external experts can help you understand not only a company's goals and plans, but also how capable it is in achieving those goals and plans. • Trade associations monitor the plans of their largest and most innovative members. Because they watch a wide range of companies in the industry, they are in an excellent position to evaluate a company's plans and predict the outcome. • Trade press articles often focus on new developments in the industry. Consequently, the reporters try to learn about upcoming events long before they happen. Interview trade reporters to get advance information about your target's plans as well as the reporter's assessment of the target's future. Reporters are especially valuable because they draw not only on their own insights, but also on the individual and collective insights of all their information sources. • Financial analysts are in the business of predicting the successes and failures of the companies they follow. They conduct research and analysis and are often privy to company plans through their contact with top executives. • Labor unions have a unique perspective on a company's future. Because their forecasts are usually quite different from management's, they provide an important balance for your research. • Public interest groups, as do labor unions, provide a valuable counterbalance to sources more sympathetic to your target company. Examine a company's own forecasts in tandem with predictions of outside knowledgeable observers. You can then begin to develop credible forecasts of a company's plans. The following article will focus on guidelines on using a company's past and current behavior to predict its future and determining how a company's external environment is likely to affect its future.

Securities Disclosure As Soundbite: The Case of CEO Pay Ratios

Though short selling has always been used as a scapegoat by the regulators and media across the world, Bangladesh should allow it in both of her bourses. Currently investors can only take long position in a stock which distorts stock prices because absence of short selling excludes pessimists from the marketplace and only allows optimists which leads to a overpriced stock market. Moreover, it has been shown that short-selling leads to more efficient price discovery, less volatility and higher liquidity in the marketplace. Most importantly, no study has shown that absence of short-selling reduce the likelihood of crashes. Allowing short selling also reduces agency cost and thus increases firm value. In addition, allowing short sale could be a sustainable solution for currently overpriced stock market in Bangladesh. Bangladesh has two stock markets. Following its emergence in 1971, Bangladesh inherited its first stock exchange, Dhaka Stock Exchange (DSE), from Pakistan and Chittagong Stock Exchange (CSE), started its journey in Chittagong in October 10th , 1995. Securities and Exchange Commission (SEC), a government body under the ministry of finance, was established on June 8 th, 1993 under the Securities and Exchange Act 1993, to regulate the securities market in Bangladesh. SEC’s responsibility includes protecting the interests of investors, developing and maintaining fair, transparent and efficient securities markets, and ensuring proper issuance of securities and compliance with securities laws.11 Regulators in Bangladesh use one weapon more than often to fight with overpriced market, i.e., margin loan regulation. In the short run, margin regulation could cool off the market. However, eventually market will be on the fire again and will be more volatile and riskier. In addition, frequent changes in margin regulation mainly hinder small investors from actively participating in the market. Allowing short sale in both bourses could be a groovy weapon and sustainable solution for regulators to fight with the overheated market condition. If the market is under-priced, equity investors will be benefited by taking the long position. However, informed investors should also have the option open to be benefited from an overpriced market. In an over priced market, like 1996, investors could capture benefits by selling overpriced securities, i.e., shorting an overpriced stock. This paper will discuss the role of short selling to improve market efficiency in DSE and CSE

Schatzberg Met Disclosure Requirements, Stanford Says

This paper applies a property rights analysis to examine what optimal audit fee compensation schedule is required by foreign based firms in order to produce internationally-credible generally accepted accounting principles (GAAP) that are acceptable to the Securities and Exchange Commission (SEC). The SEC has property rights to take away from foreign firms their discretion over what form of internationally-credible GAAP they must comply with in order to enter US securities markets. This takings decision is costly for foreign firms because it requires them to incur higher marginal audit fees associated with complying with US GAAP and the Sarbanes–Oxley Act. Utilising an argument developed by the property rights literature, a model is presented which assumes four participants: (a) Congress; (b) the SEC; (c) foreign based firms; and (d) audit firms, who compete for political influence over the determination of internationally credible-GAAP. The optimal audit fee compensation schedule required to be incurred by foreign based firms in order to produce internationally-credible GAAP financial reports is found to depend upon with which of these interest groups the SEC’s preferences coincide. Evidence is provided which supports the proposition implied by the model that European firms overinvested in the audit expenditures required to comply with the US disclosure and legal requirements.

The financing of the IASB: An analysis of donor diversity

Are recent segment disclosures of Japanese firms useful?: Views of Japanese financial analysts

The banking activities are regulated by the Bank of Thailand (BOT), while the insurance activities are regulated by the Office of Insurance Commission and the securities activities are regulated by the Securities and Exchange Commission (SEC). All of these activities are under the supervision of the Ministry of Finance (MOF). Generally, the authorities have power to prescribe regulations for the banks, insurance companies, and securities companies to comply with. If they fail to comply with or rectify failure, the relevant authority may, among other things, order them to suspend the operation entirely or partially, and may eventually withdraw the licence or order the closure of the entity. In particular cases, they may be fined, if the violation is a criminal offence. The principal laws governing the banking and financial system are the Commercial Banking Act BE 2505, and the Act on the Undertaking of Finance Business, Securities Business and Credit Foncier Business BE 2522, both of which were already combined into one Act, the Financial Institution Business Act BE 2551 (FIBA). However, FIBA will not come into effect until 3 August 2008. Insurance activities are governed by the Life Insurance Act BE 2535 and the Casualty Insurance Act BE 2535. The Securities and Exchange Act BE 2535 governs all securities activities.

It might sound perfectly obvious that in a real democracy, the majority’s interests will always win against the interests of the minority. Unfortunately, in reality, this is not the case. Small interest groups can determine the outcome of elections and enact policies that favor their own interests, rather than those of the majority. This paper identifies how, contrary to the median-voter’s model, small interest groups can win, if information asymmetries exist. Additionally, if gains and losses asymmetries are present and opportunity costs are involved for the voter, the same phenomena can occur. This article focuses on the role of interest groups in elections in democratic countries, explaining how they can enact policies that are against the public’s will.

Certified public accounting involves the expression of an opinion that corporate financial statements present fairly the financial positions of firms in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Accounting (as opposed to auditing) standards are promulgated by the Financial Accounting Standards Board (FASB) and help define what information must be revealed in audited financial reports of public corporations. The FASB is operated by the Financial Accounting Foundation, a nonprofit corporation organized by the American Institute of Certified Public Accountants (AICPA) and cosponsored by five other private interest groups. The Securities and Exchange Commission (SEC) has generally recognized and endorsed the determinations of the FASB and predecessor organizations. The process by which accounting rules are established has recurrently been and is now the object of intense public scrutiny. In its recent staff report (1976),' the Senate Government Operations Subcommittee on Reports, AccountThis paper reports the results of two statistical tests for association between the positions taken by the Financial Accounting Standards Board (FASB) and individual accounting firms with regard to accounting standards and the positions expressed by the interest groups with which each deals. We find a positive, although statistically insignificant, association between client preferences and the likelihood that an auditor will support a rule. The likelihood of FASB support for a rule is found to vary directly and significantly with the strength of FASB sponsoring-organization and accounting-firm preferences.

Spreadsheets and the Violence of Forms: Tracking Organisational and Domestic Use