CHAPTER 5 Toeing the line: regulations and disclosure

Some of the most explosive corporate governance scandals of the last two decades have revolved around deliberate fraud.

Being able to spot irregularities in financial and nonfinancial disclosures made in regulatory filings is a must for investigative business reporters. That often means reading the fine print and doggedly attempting to understand the financial information and technical language.

Financial enforcement and securities regulation agencies and stock exchanges should discover fraud and launch an investigation. However, that doesn’t always happen. Enron Corp. sneaked by the U.S. Securities and Exchange Commission (SEC) for many quarters before investigators belatedly launched a probe.

Most of the major corporate scams worldwide in the past two decades took place under the very noses of regulators, auditors, banks and other financial institutions, to say nothing of directors and shareholders.