Former SEC Chairman Slams Dodd-Frank Act

The New York Times reports that Harvey Pitt, who served as Chairman of the Securities and Exchange Commission from 2001 to 2003, testified before the Senate Banking Committee that the Dodd-Frank Act “is unduly complex, adds more layers of regulatory bureaucracy to an already over-bloated bureaucracy, makes financial regulation more cumbersome and less nimble than it already was.” His objections revolved around rules that favor institutional investors over regular shareholders, the new SEC whistleblower program, and the ineffectiveness of the legislation in preventing another financial meltdown.

PCAOB Proposes Broker-Dealer Audit Standards

The Public Company Accounting Oversight Board has proposed new rules that would require external auditors to consider the risk profiles of their broker-dealer clients when performing audits. Two attestation standards relate to compliance reports and exemption reports, while another relates to auditing supplemental information along with financial statements. The latter would supersede AU Section 551. The proposals are open for public comment through September 12, 2011.

Pushback on Switch to IFRS

Although most agree that the U.S. should move towards international financial reporting standards (IFRS), Reuters reports that the timing and the transition process are subjects of fierce debate. In hearings held recently by the Securities and Exchange Commission, a spokesperson for the National Association of State Boards of Accountancy said that the case for IFRS hasn’t been made. Others expressed concern that limiting the role of the Financial Accounting Standards Board and enhancing the role of the International Accounting Standards Board might hinder a successful transition to global standards.

Court Rules that Gupta Singled Out by SEC

A U.S. District Court ruled that Rajat Gupta, who was allegedly involved in the Galleon Group insider trading case, could move forward with his lawsuit alleging that the Securities and Exchange Commission violated his rights when it filed an administrative action instead of a criminal case. According to Bloomberg, the judge said that Gupta, formerly of Goldman Sachs, was “treated substantially disparately from 28 essentially identical defendants” by the SEC. Gupta’s suit alleges that the SEC’s administrative action denied him rights he would have had if the suit had been filed in federal court.

Citigroup’s Internal Controls Questioned in Wake of $19.2 Million Embezzlement

The New York Times reports that Citigroup faced scrutiny two years ago over its internal controls, and regulators compelled the financial institution to strengthen its risk management and compliance practices. A few weeks ago, it was raked over the coals for not immediately disclosing that hackers had stolen customer data, and Reuters reports that the company just revealed that $2.7 million was stolen from those accounts. Now, it seems that it took Citigroup almost a year to discover that millions of dollars were missing. An accountant who resigned from the organization in January is out on bail, charged with embezzling $19.2 million by moving money from Citigroup’s interest expense and debt adjustment accounts to its cash account, and then wiring the money to his personal account at JPMorgan Chase.