The problems identified that most affected the United States, however, were in
the areas of disclosure and regulation of stabilization and similar controls over
dealings. While, as discussed below, the SEC has made significant accommoda-
tions to mitigate the effects of its stabilization rules, its disclosure requirements,
particularly financial disclosure, are as much an issue now as they were in 1989.
Since the United States is one of the largest capital markets in the world, it should
be an obvious candidate when companies decide that they have to raise capital out-
side their own home market. The United States, however, also arguably has the
most detailed disclosure requirements in the world, and issuers offering securities
simultaneously in the United States and overseas have often found that compliance
with U.S. disclosure regulations adds a considerable burden to structuring an offer-
ing and to the preparation of offering documents. SEC concern for investor protec-
tion dictates that more detailed and additional disclosures and different formats
must be added to selling documents prepared in accordance with another jurisdic-
tion’s rules.
Under the SEC’s rules, although an issuer’s financial statements may be prepared
in accordance with its home country’s GAAP, those financial statements must be rec-
onciled to U.S. GAAP. Reconciliation, showing what financial results would have
looked like under U.S. GAAP, can be a difficult and expensive process. Although the
SEC has made some concessions to its requirements (discussed below), many com-
panies have chosen to forego accessing the U.S. public markets rather than undergo
reconciliation.
(c) Tarnish on the “Gold Standard”. The collapse of Enron in a sea of red ink and
undisclosed liabilities has led to a reexamination of the standards that the SEC en-
forces. Critics have asked whether U.S. GAAP, by becoming increasingly rule inten-
sive, does in fact produce the “true and fair” view of a company’s performance that
financial statements are supposed to provide. Some of the criticism leveled at the
SEC and the FASB is no doubt unjustified, and at the time of writing it is unclear how
U.S. GAAP and the SEC’s reliance on them, will be affected. It is clear, however, that
the Enron scandal has created a climate more open to changes with respect to U.S.
GAAP than ever before.
14.5 RESPONSE TO GLOBALIZATION. The SEC’s response to the challenges of
globalization have taken three forms, broadly speaking: adaptation, reciprocity, and
harmonization. First, the Commission has modified many of its rules to respond to
the requirements of non-U.S. issuers and cross-border offerings. Second, with respect
to some rules affecting non-U.S. issuers and cross-border transactions, the Commis-
sion has accepted the rules of regulators from other countries as providing the same
level of investor support as its own. In some cases, these modifications have been
made at the SEC’s own initiative and in others, such as the multijurisdictional dis-
closure system, made on a reciprocal basis with other regulators. Third, the Com-
mission has worked with other regulators to harmonize their rules or create rules
common across several jurisdictions. In order to understand how the SEC has ap-
proached the challenges of globalization, it is important to be aware of the policies
underlying the SEC’s approach.
(a) Policy Statements. In November 1988, the SEC published a Policy Statement on
the regulation of international securities markets. The SEC stated that the challenge
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