US to vote on tough financial laws

American regulators will vote this week on rules that may make it harder for companies to mask debt after Lehman Brothers Holdings was accused of misleading investors by temporarily moving assets off its books.

Securities and Exchange Commission (SEC) members will meet on Saturday to consider expanding what firms must disclose about their short-term borrowing, the agency said on its website.

Commissioners will also vote on whether to issue guidance to help companies assess if they are adhering to disclosure rules for "liquidity and capital resources", the SEC said.

SEC chairwoman Mary Schapiro said in April the agency would review whether new rules were needed to prevent banks from using accounting manoeuvres to reduce borrowing at quarter-end when they have to reveal debt levels to investors.

The agency was concerned that companies were boosting debt after quarterly reports, giving investors a misleading impression, she said.

Lehman filed the biggest bankruptcy in history on September 15, 2008, exacerbating a global credit crisis after the collapse of the US mortgage market.

Bankruptcy examiner Anton Valukas wrote in a March report that New York-based Lehman tried to hide its true financial picture by moving US$50 billion ($68.6 billion) of assets off its books and accounting for the transactions as sales.

Lawyers for former Lehman chief executive Richard Fuld said he did not know about the transactions. Spokesmen for Ernst & Young have said the Lehman financial statements it audited were in compliance with accounting rules.

The SEC sent letters to 19 financial companies in March to ask about their use of so-called repurchase agreements, in which firms contract with outside parties to sell assets and buy them back later.

Lehman improperly accounted for some repurchase agreements as sales, instead of financings, giving investors the impression it had removed assets from its books, Valukas said.

While banks are required to disclose their average short-term borrowings in annual reports, they have no obligation to do so quarterly. Banks are only obliged to disclose their maximum month-ending and quarter-ending debt levels once a year. Non-banks don't have to reveal average borrowings.

Any rules proposed at the SEC's meeting next Saturday would be subject to public comment by companies and investors.

After SEC staff members review the comments, the regulations would require a second vote by agency commissioners before taking effect.

- BLOOMBERG