Disclosure alone is not sufficient; material weaknesses
need to be actively remediated.
While the SEC's Financial Reporting and Audit Group has been
relatively quiet, it started 2019 with a bang, bringing four
coordinated actions against issuers for failure to maintain
internal controls over financial reporting ("ICFR").
Allegedly, the four issuers disclosed material weaknesses in
ICFR for an extended time, ranging from seven to 10 years, but
undertook ineffective, or no, measures to remediate, even taking
months or years to remediate after being contacted by the
SEC. The clear message here is: (i) the SEC continues its focus on
ICFR, and (ii) issuers must not only disclose but also put
resources into remediating material weaknesses as swiftly as
possible. These messages are not new, but they are significantly
magnified by these new actions.
