Existentialism, it seems, is all the rage. Last August the Summer Reading Club of Crawford, Texas tackled The Stranger by Camus. The philosophy is even seeping into SEC filings.
Thanks to Sarbanes-Oxley, public companies must have a system – termed "disclosure controls and procedures" - to ensure their SEC filings are complete and accurate. They need to figure out what info they must include and how it will all get from their employees’ pointy little heads into the SEC’s mailbox.
Icon Income Fund Nine, LLC, a member of the ICON Advisers, Inc. mutual fund family, admitted last year that its disclosure controls and procedures were flawed. But the fund reports in its third-quarter 10-Q that they’ve hired a couple more CPAs and think they’ve got this licked.
Lest we get too excited, Icon wants us to know that the SEC, applying my mother’s "nobody’s perfect" principle, says a company’s controls need only "reasonably assure" that everything gets reported. The 10-Q explores the depths of this concept:
"Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our...disclosure controls and procedures have been designed to meet reasonable assurance standards. Disclosure controls and procedures cannot detect or prevent all error and fraud. Some inherent limitations in disclosure controls and procedures include costs of implementation, faulty decision-making, simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all anticipated and unanticipated future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with established Policies or procedures."
Jeez Louise, enough already! You had me at "reasonable assurance standards."
Look, we read Sartre in college. We get what you’re trying to say. DEAR INVESTOR: YOU EXIST IN A CHAOTIC AND PURPOSELESS UNIVERSE. OUR PROCEDURES, AND EVERYTHING ELSE YOU BELIEVE IN, ARE MERELY AN ILLUSION. GOT IT? YOU’RE ON YOUR OWN.
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