Matthew Kubic

The SEC’s September Enforcement Spike

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The Securities and Exchange Commission (SEC) periodically reports on its performance to the public and Congress, emphasizing metrics such as the number of enforcement actions (“cases”) filed (see, e.g., SEC, 2018, 2020). Former co-directors of the Division of Enforcement acknowledge the potential dangers of focusing on quantitative measurements: “the raw number of cases filed or the total amounts of fines and penalties assessed during an arbitrary time period such as a single fiscal year—cannot adequately measure the effectiveness of an enforcement program…[and] can result in a misalignment of incentives and objectives” (SEC 2018). We examine this concern by testing whether … Read more

How Effective Is the SEC in Identifying Financial Reporting Errors?

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The Securities and Exchange Commission (SEC) Division of Corporate Finance (DCF) reviews and regulates information in public filings to “deter fraud and facilitate investor access to information necessary to make informed investment decisions.”

Commentators criticize the SEC for being an ineffective regulator, with specific concerns about its ability to identify financial reporting errors or fraud in companies such as Enron.  These concerns led to a General Accountability Office (GAO) review, new regulations codified in the Sarbanes-Oxley Act, calls for increased funding, and a renewed focus on detecting accounting errors.  Despite ample anecdotal evidence of … Read more