SEC commissioner: Hold lawyers' feet to the fire

WASHINGTON Mon May 19, 2014 12:37pm EDT

WASHINGTON May 19 (Reuters) - Lawyers who provide advice to public companies about their financial disclosures should be required to attest to their accuracy and be held more accountable, a top U.S. securities regulator said on Monday.

"We should be considering attestation in new areas," Securities and Exchange Commission member Kara Stein, a Democrat, said in a speech at the Compliance Week conference in Washington, D.C.

"Should there be one for registered municipal advisers? Or one for lawyers on the accuracy of issuer disclosures?" she asked.

The 2002 Sarbanes-Oxley law contains several key provisions that aim to hold chief executive officers and chief financial officers more accountable for financial reporting and internal controls.

CEOs, for instance, must sign their name to certify that a company's financial disclosures comply with federal securities laws.

In addition, attestation rules have since been added in other areas, such as requiring brokerages to annually certify the strength of their compliance policies and measures to ensure executives comply with the Volcker rule's ban on proprietary trading.

"I personally believe that having an executive sign an attestation leads to a more rigorous internal assessment of a firm's business and regulatory capabilities. Nothing focuses the mind like signing your name," Stein said.

When asked during a question-and-answer session if she could elaborate on the subject, she said she was trying to be "provocative" and urged the industry to provide feedback on whether more attestation requirements could bolster compliance.

Stein's speech comes at a time when the SEC is ramping up its enforcement efforts against so-called "gatekeepers" such as auditors and boards of directors.

The agency also has the power to bar accountants and lawyers from practicing before the SEC if they run afoul of federal securities laws.

"One gatekeeper that often is absent from the list of cases I see every week are the lawyers," Stein said.

"Are we treating lawyers differently from other gatekeepers, such as accountants? I think we should carefully review the role that lawyers play in our markets, with a view toward how they can better help deter misconduct and prevent fraud," she added. (Editing by Jeffrey Benkoe)

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