George W. Bush Elected President
Auditor Independence Rules
The SEC adopted new rules to strengthen auditor independence after Congress and the audit profession rebuffed stricter rules originally proposed by SEC Chairman Arthur Levitt Jr.
Regulation FD
Regulation FD prohibited a company from intentionally disclosing information to select persons, such as securities firms and institutional investors, without disclosing that information to the public at large.
Online Trading and Day Trading
NYSE Move to Decimals
First Global Index
IAR and IARD
Nasdaq Independence
Muni Council
With encouragement from the Municipal Securities Rulemaking Board, municipal bond market participants formed the Muni Council to address industry problems, especially in improving secondary market disclosure.
Al-Qaeda Attacks on World Trade Center and Pentagon
Decimalization
The odd-eighths scandal having demonstrated that fractional quoting tended to keep broker-dealer fees artificially high, after an interval of quoting in sixteenths, all securities markets began quoting in decimals.
Markets Close in Wake of Terrorist Attack
On September 11, as the World Trade Center towers fell, the impact on the securities industry was major. Excluding emergency workers and airline passengers, over 70% of persons killed that day in New York City worked in the financial services industry. The Seven World Trade Center building, which housed the SEC New York Regional Office, later collapsed with no fatalities. Most of the Wall Street area had no utilities or communication services and was covered in debris. Several billion dollars of physical securities were destroyed.
Federal, state and local governments, the U.S. Securities and Exchange Commission, self-regulatory organizations and the private securities industry worked closely with each another to allow the debt markets to re-open on September 13 and the equity and option markets on September 17. The SEC used its emergency powers to allow issuers to buy back their own stock at the open and close of the market, so that they could temporarily stabilize the market. A variety of net capital, settlement and recordkeeping rules were waived, amended or suspended, as were prohibitions regarding borrowing from affiliates.
Enron Scandal
ArcaEx
FASB Ends Pooling-of-Interests Accounting
The Financial Accounting Standards Board revised the rules for accounting for business combinations, requiring that all acquisitions be accounted for by the purchase method, thus ending the controversial pooling-of-interests method. The FASB amended the rules for goodwill and other intangible assets, indicating that goodwill and intangibles with indefinite lives would not be amortized but tested at least annually for impairment.
NYRO on 9/11
Department of Homeland Security Established
WorldCom Fraud
Sarbanes-Oxley Act
Congress enacted the Sarbanes-Oxley Act (SOX) on July 30, in light of the Enron, WorldCom, Global Crossing, Adelphia and Tyco corporate scandals. SOX prohibited an accounting firm from providing audit work for a public company while contemporaneously providing a host of other services. SOX required each public firm to have an audit committee composed of independent directors, and prohibited company loans to certain executives and directors. It required attorneys for public corporations to report material violations of law to the corporation’s chief legal advisor and/or the CEO. One of the most controversial aspects of SOX was Section 404, requiring management certification of internal controls over financial reporting. These measures increased the federal government’s oversight regarding corporate compliance standards.
SOX also provided that the Financial Accounting Standards Board would be financed by fees against public companies; the FASB previously had received voluntary funding through product sales and membership contributions.
Public Company Accounting Oversight Board
Research Analyst Investigation
New Uniform Securities Act
International Convergence of Accounting Standards
Invasion of Iraq
Abu Ghraib
Human Genome Project
Columbia Explodes
NYSE Corporate Governance Standards
Attorney Conduct Rules
Following a mandate in the Sarbanes-Oxley Act, the U.S. Securities and Exchange Commission created rules for the conduct of attorneys practicing before it. The American Bar Association amended its Model Rules of Professional Conduct to accommodate the SEC’s rules.
Global Settlement in Analyst Cases
State and national securities regulators undertook a coordinated effort to investigate research analyst misconduct at major Wall Street firms, following New York State’s settlement with Merrill Lynch. The $1.4 billion global settlement with ten firms required each firm to set up “Chinese walls” separating its analysts from its investment bankers.
SEC Reaffirms FASB
Late Trading and Market Timing
International Convergence of Accounting Standards
The Financial Accounting Standards Board and the International Accounting Standards Board began working together towards the international convergence of accounting standards, describing convergence and the tactics to achieve it in the 2002 Norwalk Agreement, followed by a 2006 Memorandum of Understanding issued between the boards. In 2007, the U.S. Securities and Exchange Commission began accepting financial statements from foreign private issuers prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB without reconciliation with U.S. generally accepted accounting principles.
Tsunami in Asia
The Hub System
Internal Control Over Financial Reporting
The PCAOB adopted and the SEC approved Auditing Standard No. 2 to enact Section 404 of the Sarbanes-Oxley Act of 2002 requiring that management report on the effectiveness of internal control over financial reporting and auditors attest to that assessment. Public companies, facing a backlog of deferred maintenance, felt burdened by increased cost and time required to comply, and audit firms did substantially more work to comply with the new PCAOB standard. Critics complained of onerous and anticompetitive regulation while supporters pointed to numerous benefits including a reduced cost of capital. After more than three years, the PCAOB replaced AS 2 with Auditing Standard No. 5 a streamlined, more risk- and principles-based approach that retained the core principles of the original standard.
MSRB Oversight Hearing
Federal Preemption of State Anti-Predatory Lending Laws
Net Capitalization Rule Exemption
Municipal Securities Central Post Office
Hurricane Katrina
London Bombings
Angela Merkel Becomes German Chancellor
Reform of Offering Process
PUHCA Repealed
Regulation NMS
Ban on Municipal Securities Dealer Use of Consultants
Real Time Reporting of Municipal Securities Transactions
Nasdaq Goes Public
Mars Reconnaissance Orbiter
Pluto Reclassified as Dwarf Planet
Twitter
Credit Rating Agency Reform Act
NYSE Demutualizes
529 Accounts
College savings plans established by state issuers under Section 529 of the Internal Revenue Code used registered mutual funds as primary investment vehicles, and were not regulated as mutual funds under federal securities laws. The Municipal Securities Rulemaking Board and the NASD determined that 529 plan sales and mutual fund sales presented the same broker-dealer practice issues, and issued a joint statement indicating that they would attempt to conform future rules and interpretations on sales practices.
Court Upholds SLUSA
Fair Value Measurements
The Financial Accounting Standards Board accelerated a move from cost-based measurements to fair value measurements by adopting uniform definitions of fair value and guidance for applying those definitions. A year later, the FASB allowed entities to choose to measure many financial instruments at fair value.
Mary Schapiro Appointed NASD Chair and CEO
After service as a SEC Commissioner and as Chair of the Commodity Futures Trading Commission, Mary Schapiro became president of NASD Regulation, Inc. in 1996. In 2006, she became NASD’s Chair and CEO, overseeing NASD’s consolidation with the member regulation, enforcement and arbitration functions of the New York Stock Exchange to form FINRA.
Access Equals Delivery
Nancy Pelosi First Woman Speaker of the House
Benazir Bhutto Assassinated
iPhone
District Offices Regain Regional Status
FINRA
NYSE Euronext
NYSE Group, Inc. and Euronext, N.V. merged, bringing together major securities markets across the United States and Europe.
Sub-Prime Mortgage Collapse
Barack Obama Elected President
“Scheme Liability” Rejected
The U.S. Supreme Court rejected the “scheme liability” theory in Stoneridge Investment Partners, LLC v. Scientific America, Inc.. The theory posited that those allegedly participating in a deceptive scheme, but not communicating with the public, could be charged as primary violators of the federal securities laws.
Fed Intervenes in Collapse of Bear, Stearns
In March, the Federal Reserve extended its role as an emergency lender, intervening to facilitate the purchase of investment house Bear, Stearns & Co. by JPMorgan Chase. The Fed also took the unprecedented step of temporarily opening its discount window to make secured loans to primary dealers. The move was designed to improve the ability of dealers to extend credit to participants in the faltering securitization markets.
Proposed Overhaul of Financial Regulatory System
Great Recession
Madoff Scandal
Sonia Sotomayor First Latina U.S. Supreme Court Justice
Regional Reform Post-Madoff
Mary Schapiro Appointed SEC Chairman
Credit Card Company Restrictions
Great Recession
Beginning in September, a worldwide financial crisis led the U.S. government to take emergency actions to bail out or nationalize financial institutions exposed to distressed assets. Fannie Mae and Freddie Mac were taken over by the federal government. Lehman Brothers, Inc. filed for Chapter 11 bankruptcy, Merrill Lynch was sold to Bank of America, and Goldman Sachs and Morgan Stanley were transformed into bank holding companies. Washington Mutual Bank collapsed, the largest bank failure to date in U.S. history. Congress approved the Troubled Assets Relief Program (TARP), a bailout package which would allow the Treasury to buy underperforming mortgage-related securities. However, the U.S. rescue plan failed to slow a global market meltdown. Extreme volatility affected stock markets worldwide, with most suffering record declines. The U.S. unemployment rate rose to over 10% by October 2009, and remained at 9% or higher until the end of 2011. In 2012, government data revealed that the median net worth of American families plunged almost 40% from 2007 to 2010.
FASB GAAP Codification
The Financial Accounting Standards Board launched the FASB Accounting Standards Codification as the single source of authoritative non-governmental U.S. generally accepted accounting principles. Various other announcements from the AICPA and the Emerging Issues Task Force were included in the codification.