By: Cydney Posner

In your spare time, you might be interested in taking a look at the SEC's 2005 annual report, which has just been posted. In the report, the SEC identifies its various accomplishments and challenges during the year. Among the accomplishments, along with Securities Act reform and other regulatory and enforcement developments, the review during 2005 of over 6,000 companies, 51% of reporting (non-investment) companies. (Remember that companies do not always receive comments when their filings are reviewed.) Regulation related to disclosures of executive compensation and related-party transactions and communications with beneficial owners were both planned for 2005, but did not make it to the table. Expect them this fiscal year. Among the challenges was the SEC's first full financial statement audit, which led to the identification of three material internal control weaknesses in the areas of recording and reporting disgorgement and penalties, preparing financial statements and information technology security. The SEC's financial statements nevertheless received an unqualified opinion from the GAO. The report explains how the SEC plans to address these weaknesses, which it takes very seriously. That explanation, starting on p.20 of the 101-page report, might be helpful as a model for companies also facing material control weaknesses.

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