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Regulation and Compliance > Federal Regulation > SEC

Speaker of the Month: Get Back to Basics

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Laura Simone Unger, former acting chair of the Securities & Exchange Commission, will speak on Friday, July 26, during AIMR’s Financial Analysts Seminar where she will address client confidence in today’s markets along with the SEC’s future agendas.

We spoke with the IA Speaker of the Month about life after the SEC, investment objectives, and what she thinks should be done about fraudulent disclosure.

What have you been doing since leaving the SEC? Funny, my husband asks me that question all the time. I joined a board and have been working on some consulting projects. I’ve also done quite a few speaking engagements, specifically about analyst conflicts and what it will take to put things back together–especially after Enron.

What will you be covering at the financial analysts seminar next month? In April 2001, I gave a speech about analyst conflicts. So I’ll go over that again, along with pursuing what needs to be done at the regulatory level, supervisory chain of command, compensation structures, stock ownership, and disclosure of stock ownership.

Is there anything planners should keep in mind after 9/11 and post-Enron? Pay very close attention to your clients’ investment objectives. Planners and advisors need to do their due diligence and extensively research the companies they invest in on behalf of their clients. What we are now seeing is client backlash from a time when people were a little bit more complacent when it came to research. Planners need to spend more time on fundamental analysis and be knowledgeable about things like the company’s earnings, sales, cash flow, if they have a responsive board, and the auditors, if any.

What are your thoughts on the SEC agenda regarding fraudulent reporting? Well, the SEC is focused on disclosure, how to improve the disclosure system, and enforcement of that system. They are stepping up in areas of accounting. And the SEC is now enacting zero tolerance for fraudulent reporting. The extent of how this impacts financial planners, I think, deals specifically in company analysis. The way planners evaluate companies will change, what they base their recommendations on will change, and most importantly, the new disclosure agenda will expand their knowledge of specific companies.

What are your economic predictions? What is clouding overall economic recovery is a lack of investor confidence in general. Investors don’t believe what they are reading–and I certainly can’t blame them. There is a lack of integrity in the marketplace; we are seeing that across the board. I think what is required is a restoration of integrity among financial professionals. If a company’s regulatory board or auditors are independent, meaning separate from the corporations they are auditing, there is less room for misconception and error. This also eliminates conflict of interest as we saw earlier this year. To regulate this industry will restore the integrity of this industry, which will then restore investor trust.

Is there anything else our readers should be aware of? I think your readers should get their investors back in the marketplace so we can see a recovery.

Seriously–everyone in the financial industry is going to be closely scrutinized. I know planners have their own code of standards; now is a good time to look at those ethics and make sure they are as high as they can possibly be.


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