SEC chairman reviews the Commission's 1995 agenda.
"We are focusing on mutual funds because of their enormous popularity as vehicles for investment and retirement," said Levitt. "Without risk, of course, there is no market. Our concern is not to eliminate risk, but to make sure people have a sense of the degree of risk before they turn over their money." Levitt spoke of a recent SEC initiative inviting comments and suggestions from users on a range of proposals on mutual fund risk measurements (see "SEC Seeks Comments on Proposals for Pisk Disclosure," JofA, Jun. 95, page 15).
Levitt told the audience he expected the SEC to determine the best solution for this problem by yearend. Levitt said developments in Orange County, California, represented a defining moment for the municipal market. "The outcome will likely determine a variety of crucial issues for this vibrant marketplace," said Levitt. He warned of the severe consequences if the county defaults. He said Wall Street would be hurt by a default, but the real victims would be the thousands that held stakes in Orange County debt. "The ensuing higher interest rates on its debt would effectively constitute a huge tax increase on its taxpayers," said Levitt. He said the SEC would provide municipalities with seminars and speeches to local officials about investment policies, risk assessment and financial instruments this summer.
Levitt said the SEC was addressing the broader issue of capital formation rules to ensure they were adequate to meet the needs of the twenty-first century. The SEC is planning to announce its proposals on granting "safe-harbor" protection to companies for the disclosure of forward-looking information. "The question is how to encourage businesses to provide more useful information to the market safely without stripping individual investors of remedies against fraud," said Levitt.
Another initiative proposed by the chairman would allow companies to simplify financial statements by "excluding many of the complex footnotes included in annual reports and other documents sent to investors." Levitt said information on the marketplace would not be compromised because it would still be filed publicly with the commission and sent to investors by companies on request.
"While listings in major international markets, such as London and Tokyo, have hit a plateau or even declined in recent years," said Levitt, "foreign issuer participation in the U.S. markets has grown dramatically in the 1990s." He said that in the last four years, more than 440 foreign companies entered the U.S. public market for the first time, bringing the total to 670. The chairman said the future of finance is international, and that good relations with foreign counterparts of the SEC protect American investors. Levitt announced that London recently agreed to allow the SEC to obtain regular information on United Kingdom advisers offering services in the United States. "You can expect the SEC to take this new approach with other countries as well," said Levitt.
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|Title Annotation:||SEC chairman Arthur Levitt|
|Publication:||Journal of Accountancy|
|Date:||Jul 1, 1995|
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