Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, said the agency -- as Lehman's primary regulator -- relied on the integrity of financial statements supplied by Lehman's management.
'Lehman's disclosure would lead one to believe that it accounted for all of its repos (repurchase deals) as financings and that the repos were properly reported as such on the balance sheet,' Schapiro said in testimony prepared for the House Financial Services Committee.
The committee is holding a hearing on Tuesday about the failure of investment bank Lehman Brothers in 2008 and the findings of a Lehman bankruptcy examiner.
The examiner's report last month said Lehman did about $50 billion in so-called Repo 105 transactions, in which repurchase deals were booked as sales instead of financings. That accounting move allowed Lehman to conceal assets and liabilities, the report said.
Schapiro said the report raised 'critical and legitimate questions' about Lehman's financial reporting and also about how widespread the practice might be.
Last month the SEC sent letters to a couple of dozen large financial firms, demanding detailed reports on their accounting and disclosure of repo transactions.
'Where we find that companies are engaging in financial transactions that are inconsistent with their publicly reported financial condition, we will take appropriate action,' Schapiro said in her testimony, which was posted on the committee's website.
(Reporting by Karey Wutkowski, editing by Gerald E. McCormick) Keywords: LEHMAN/SCHAPIRO (E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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