Capital Markets

Internal Controls May Stall IPOs: Harvey Pitt

Arguing for the virtues of longer lead time, the former SEC commissioner says delays in offerings can only help investors.
Ed ZwirnFebruary 20, 2004

Recent implementation of stricter corporate internal controls may force some companies to wait longer before trying to go public, former Securities and Exchange Commissioner Harvey Pitt told a gathering of former top U.S. securities regulators.

The delay could benefit investors, Pitt told the Reuters Corporate Reform Summit on Wednesday in New York City. “There will be longer lead times, and some of the companies that might have gone public after six months, three months, nine months may have to wait two years,” Pitt said.

“That’s not a bad thing for the public,” he said. “A track record is a good thing.”

Pitt resigned in November 2002 amid controversy over the nomination of William Webster as the head of the Public Company Accounting Oversight Board. (Webster had chaired the audit committee of U.S. Technologies, which was then being sued for fraud by investors.) At the Reuters meeting, Pitt said that efforts to prevent fraud had far to go.

The government’s detection of financial fraud usually comes after the fact and, at best, in the “midstream” of illegal activity, the commissioner said. “The government is so far behind,” Pitt said when asked to discuss the SEC’s enforcement program, which has been exposed to increased scrutiny in recent years amid a rash of corporate scandals.