Market Regulation: Securities Laws and Authorities: 

Regulatory Enforcement

  

Enforcement Testing of Accounting Standards

Position: Regulators should use at least two selection criteria in determining which firms to review for potential breaches of accounting standards, one of which should be a risk-based model.

Rationale: Reliance on one method may result in regulators overlooking potential offenders, and could send a message to companies not on the regulator’s list of high-risk companies that their reporting is acceptable, even if it does not provide the quality, timeliness, and completeness envisioned by the standards.

Where stated: EAC - CESR Enforcing Acctg Stds

 

Regulatory Enforcement

Position: Regulatory authorities must provide effective and consistent oversight and enforcement of regulations to ensure the integrity of capital markets, and they need a broad range of enforcement mechanisms to enforce compliance with rules and standards.

Rationale: Consistent oversight and enforcement of regulations and standards prevents the creation of a two-tiered market, enhances market integrity, and bolsters investor confidence. Regulators need a wide range of enforcement tools, including disgorgement and restitution, to make them less reluctant to pursue violators.

Where stated: Bowman on Single Regulator; EAC - CESR Enforcing Acctg Stds; CAC - Wise Person's Committee; CAC - BC Securities Regulation; APAC - NZ SC Inv Adv Law 2003

 

Enforcement of Accounting Rules

Position: Aggressive and consistent enforcement of all financial reporting rules are needed to ensure high-quality financial disclosures.

Rationale: Financial reporting standards are effectively useless unless vigorously enforced.

Where stated: USAC Audit SC - Audit Oversight; EAC - UK Listing Rules

 

Audit Committee Rules Applied Consistently

Position: Companies operating in specialist niches should have to meet the same audit committee disclosure and structure requirements as companies operating in more traditional markets.

Rationale: Companies in specialist niches are affected by the same conflicts and potential for accounting fraud as more traditional companies and therefore should meet the same independence and financial experts’ requirements as traditional companies. In cases where this is not feasible they should disclose such deficiencies to investors to alert them to the possibility of management influence on the audit committee.

Where stated: CAC - CSA Audit Committees