On Friday, July 19, 2002, as the Dow Jones industrial average plunged to its lowest level in almost four years, Harvey Pitt, chairman of the Securities and Exchange Commission (SEC), reassured investors with accounting jitters.
The main reason for accounting jitters is the anticipation of another wave of corporate restatements before the August 14, 2002 deadline for corporate officers to personally certify their companies' reports. Investors sense this new requirement will cause companies to "come clean" with more market-lowering earnings restatements.
Abby Joseph Cohen, managing director of Goldman Sachs, offered investors hope, saying, "In the second half of the year, these [corporate] numbers are going to be very, very clean." But, until then, investors are steering clear of stocks and selling off securities in record numbers.
Speaking at the National Press Club, Chairman Pitt acknowledged the capital markets were still rightfully fretful after scandals at Enron, WorldCom, and a host of other companies. But he counseled investors to stay calm, predicting, "My expectation is we will see the overwhelming majority of corporations, CEOs and CFOs feel comfortable in certifying. In fact we've already started receiving certifications."
Chairman Pitt also outlined for the Press Club the SEC's major initiatives since he took an oath to protect the interests of investors. Highlights of these initiatives are available on the SEC's Web site, along with a comparison of the Commission's enforcement record from 2000 to 2002. The list of initiatives offers even further prevention against future cases of accounting jitters, which will hopefully be sufficient to lead more investors to embrace the emerging sense of optimism summed up by New York Stock Exchange Chairman Richard Grasso, who said, "It's always darkest before the dawn."