Banks and the SEC

The SEC has launched a campaign against "earnings management" by publicly traded corporations, namely, the corporate practice of manipulating reported earnings through "creative" accounting and revenue recognition practices. One of the early public targets of the SEC's earnings management initiative, SunTrust Banks, was required by the SEC staff to restate previously reported earnings over a three-year period after the SEC concluded that SunTrust had "overreserved" potential loan losses and correspondingly underreported earnings during those three years. Although the SEC's actions were blunted by the protests of key federal banking agencies, the SEC's continuing concerns over "earnings management" warrant careful attention by banking organizations with publicly-traded securities.