One thing that people are wondering about is whether or not quarterly and annual reporting is enough. If the information provided in these documents is useful, perhaps there needs to be more frequent reporting. We now live in a world in which technology permits us to access information, especially up-to-date information, on a continuous basis. Why not take advantage of this? Of course, frequent reporting will cause an outcry by corporate America, which already complains about the costs of reporting as it is, but there may be several viable ways to address this. One is to force companies to submit their reports earlier, which is something that is currently being considered .  Instead of providing a 90-day deadline to file annual reports after the fiscal year, it could now be 60 days. For quarterly filings, the deadline could be shortened to 30 days instead of 45. However, these suggestions may not be ideal ”the frequency of the reports is still the same, and only the timeliness is improved. Also, as pointed out in a BusinessWeek commentary , this proposal may only add to concerns about the hastiness, and thus the accuracy, with which the reports get compiled.  Another way to address the problem of infrequent reporting (and one that is also currently being considered) is to force companies to reveal, as soon as it is known, any material information that investors would deem important as part of the disclosure requirements.  Such information could include the selling and buying of insiders ”information that currently can take many months before it is filed.
Others believe that the SEC may be too weak because it cannot prosecute criminally. If we believe that criminal prosecution can serve as a key deterrent to corporate crime, there may be some truth to the notion that the SEC doesn't really have the policing power necessary to do its job. However, this may not really be a critical problem. The SEC can easily persuade prosecutors to bring criminal charges once it has evidence that a case is merited. Also, it is important to keep in mind that it is difficult to prosecute corporate criminals to begin with. As pointed out in an article in the July 1, 2002, issue of BusinessWeek , securities laws are ambiguous, sophisticated financial concepts are difficult to grasp, and executives have plenty of tricks up their sleeve to absolve themselves of responsibility (e.g., "I didn't know that the books were fraudulent").  Therefore, given the current difficulties that we already have with criminal charges, it may not make sense to give an additional agency, such as the SEC, the additional responsibility of bringing criminal charges.
Another problem may be that the SEC is underfunded. Being underfunded has two repercussions . First, the SEC may be hindered in its ability to hire and retain the best staff. One estimate has SEC attorneys and examiners as being paid up to 40 percent less than their peers at comparable federal agencies.  In 2001, Congress gave its approval to the SEC to pay its lawyers and accountants salaries that are competitive with other government banking agencies, such as the Federal Reserve. However, Pitt felt that Bush's proposed $29 million dollar increase (6.6 percent), announced in February 2002, wouldn't be enough to significantly raise salaries.  The increase in budget from the passage of the Public Company Accounting Reform and Investor Protection Act of 2002 ended up being much larger ”more than $300 million! For a long time, the SEC has had the distinction of being an important stepping-stone for many young, ambitious, and talented attorneys and accountants who can usually count on the experience to command much higher salaries elsewhere. These talented people gain experience and a name for themselves at the SEC. Then, they get hired away by the very law firms that represent companies, auditing firms, and individuals who are working against the SEC. According to one estimate, the SEC employee turnover rate is at 30 percent, which is double the rate for the rest of the government.  Losing talent shortens the SEC's institutional memory and the average experience of its key employees . Losing talent also increases the time and money needed to train new hires. Even Pitt joined the SEC fresh out of law school in 1968, and, despite becoming the youngest general counsel in SEC history at the age of 30, he himself also parlayed that experience to join a law firm in 1978.
The second repercussion to being underfunded is being understaffed. Since 1993, the SEC's workload has increased by 80 percent, but staffing at the SEC has been stagnant.  Former SEC commissioner Laura S. Unger once admitted that there were only about 100 lawyers who reviewed the disclosure documents of the 17,000 public firms.  An SEC chief accountant stated that only 1 out of 15 annual reports gets reviewed.  While it may be impossible for the SEC to ever be able to thoroughly pursue and investigate all possible violations, a larger staff will definitely be able to do more. In light of the recent crisis, Pitt had tripled the number of SEC probes.  However, over-working the current staff cannot last forever. Fortunately, the Public Company Accounting Reform and Investor Protection Act of 2002 mandated that the SEC hire hundreds more people. Of course, it takes time to hire, train, and effectively use so many new employees. In fact, while the increased funding started in 2002, the SEC had plans to hire only 100 new people that year and planned to delay the hiring of an additional 200 people until future years .  Therefore, the higher funding might be too little and too late for many investors.
Finally, does the SEC have enough clout in the securities markets? For example, does it have the authority to regulate corporate executives, directors, and auditors? Again, the SEC's main purpose is to ensure corporate disclosure, so the easy answer to this question is "no." We have traditionally relied on shareholders and directors to police their own executives' conduct, and we have let the accounting profession police their own activities as well. However, as we have seen the actions of officers, directors, and auditors having detrimental effects on investors, whom the SEC is supposed to protect, perhaps it is time for the SEC to expand its authority. The Responsibility Act gives the SEC a bigger stick to wield , but is this the right solution? We will discuss this later. At this point, with the mentioning of auditing, it may be insightful to discuss Pitt's predecessor, Arthur Levitt, who left the SEC in 2001 while adamantly believing that things were wrong ”especially with the accounting profession.