THE FASB’S SABOTAGE OF CONGRESSIONAL POLICY AND FEDERAL SECURITIES LAWS

Abstract

The Securities Exchange Commission (hereinafter “SEC” or “Commission”) was created by the Securities Exchange Act of 1934 and given exclusive authority to “make, amend, and rescind such rules and regulations as may be necessary to carry out the provisions of this title including rules and regulations governing registration statements and prospectuses for various classes of securities and issuers [and] to prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and earning statement, and the methods to be followed in the preparation of accounts”.

From 1973 to 2002 the Financial Accounting Standards Board (hereinafter “FASB”), a private not-for-profit corporation, was recognized by the SEC to make, amend, and rescind rules defining accounting and prescribing the form in which the required accounting information must be set forth in in the balance sheet and earning statement even though the SEC was not specifically authorized by law to recognize a private standard-setting body. In 2002 the SEC was specifically authorized by the Sarbanes Oxley Act to recognize private standard-setting bodies provided the standard-setting body met certain conditions. In 2002 the SEC recognized the FASB as the only private standard-setting body to develop accounting standards (“GAAP”).
This article argues and documents that from 1973 to the present the FASB has sabotaged the purpose for which the securities laws were enacted as well as Congressional policy to protect the nation from national emergencies caused by sudden and unreasonable fluctuations in the prices of securities which put the Federal Government to great expense, burdens the national credit, produces widespread unemployment, causes the dislocation of trade, transportation, and industry, burdens interstate commerce, and adversely affect the general welfare. Moreover, this article further argues that the SEC has been complicit in the FASB’s sabotage of the securities laws which the SEC was created to enforce, as well as that of Congressional policy that created the SEC.
The FASB’s sabotage of Congressional policy and securities laws clearly encompasses public policy issues, as does the SEC’s complicity in the FASB’s sabotage.
(NOTE: Since the accounting issues discussed herein deal with legal issues, the article is written in a format appropriate for law.)