Catch Me If You Can
We will soon introduce you to a few leading-edge analytical tools that might make a big difference in your performance. We have worked on Wall Street for a long-time...it is a remarkably different place than it was even five years ago. Are you keeping up with the technological innovations?
We used to get 10-Q’s in the mail...then via CD-ROM…
The world is changing...and the SEC is on the case
.......Christopher Cox...................Leo.............
Me if You Can
Speech by SEC Chairman:
Opening Remarks to the Practising Law Institute’s SEC Speaks Series
by
Chairman Christopher Cox
Washington, D.C.
February 9, 2007
We will join the discussion half way through his speech...and provide a link to the full speech below
It is fascinating to consider that the SEC’s investigations of backdating provide a dramatic illustration of the value of a very new bit of technology called interactive data.
Prior to 2003, the form that issuers and executives use to report their stock option exercises, Form 4, was filed with the SEC the old-fashioned way - without using computer tagging, or what I call interactive data. And so in order to analyze the data, all of the numbers and dates had to be manually re-typed before they could even be used within databases or spreadsheets. Not surprisingly, for all of that time, the backdating phenomenon was never uncovered.
Starting in 2003, however, the SEC began collecting the information on the Form 4s in interactive data format. With the help of interactive data, understanding this information suddenly became much easier and cheaper - not only for investigators at the SEC, but also for academics, analysts, and financial detectives throughout the economy. They could now systematically sift through the data and look for patterns and anomalies. And not only was all of the new information available in interactive format, but the Commission also began tagging the old data in the archival Form 4s using the XML computer language.
It was especially fortunate that this real-time interactive data technology was adopted just as the SEC put into effect new rules requiring real-time reporting of option awards within two days of the grant. Before the Sarbanes-Oxley Act, of course, option awards weren’t reported in anything close to real time, so a grant in January might not have to be disclosed until more than a year later.
Not surprisingly, once real time disclosure was combined with interactive data to give the Commission and the public almost instant access to information about stock option grants in immediately analyzable form, we began to find clues that had previously gone undetected. That led directly to the discovery of what we now know were billions of dollars of backdated stock option awards.
It’s because of the potential interactive data holds to give investors and analysts remarkable new insights into the disclosures we already mandate that the SEC has recently committed to a $54 million initiative to convert all of our filings, and the entire EDGAR system, to this new interactive format.
It is, after all, the 21st century. And it’s high time we tap the computing power of today’s technology, and take advantage of the real-time speed of the Internet.
But the SEC has a lot of other irons in the fire...they recently charged hackers with illegally tapping into brokerage accounts:
In several recent account intrusion cases, we’ve charged that the defendants illegally hacked into the brokerage accounts of individual investors, and liquidated the investors’ holdings. They then used the investors’ money to buy large quantities of shares in small, thinly traded companies that the fraudsters already owned. The fraudsters then sold their own shares at the inflated prices they’d just managed to manipulate.
read the full transcript of this speech by SEC Chairman Christopher Cox
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Christopher Cox is the 28th Chairman of the Securities and Exchange Commission. He was appointed by President Bush on June 2, 2005, and unanimously confirmed by the Senate on July 29, 2005. He was sworn in on August 3, 2005.
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The content contained represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. Underthecounter holds a long position in a DVD version of Catch
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