SEC Chairman Mary Schapiro isn't shy about lavishing praise on her lawyers in the Commission's Corporation Finance Division.  Speaking at the Practising Law Institute's annual SEC Speaks conference, Ms. Schapiro said that, during the initial public offering approval process, they will not shy away from asking companies to make key changes to their financial disclosures or governing bylaws to protect investors. Ms. Schapiro lauded the CorpFin group for aggressively challenging companies going public that used, what appears to be, questionable accounting practices or appeared to try and put shareholders at a disadvantage.

"In reviewing the most recent wave of IPOs, Corp Fin quickly stopped problematic revenue recognition practices.  And they halted the use of misleading non-GAAP measures before these practices - prevalent during the tech bubble of the 90s - could take root again." - Mary Schapiro.

Mandatory Arbitration Provision. Ms. Schapiro referred to an instance where the company's IPO documents contained a mandatory arbitration provision - which the division quickly challenged because it would have been disadvantageous to investors.   "Disclosure teams acted swiftly when the right of investors to have their day in court was threatened," she said. Ms. Schapiro did not identify any companies, though it was clear that her comments were referring to 2 recent incidents in which the SEC asked private equity firm Carlyle Group LP and daily-deals website Groupon Inc to make key changes during the approval process for their IPOs.

In the case of the Carlyle Group, earlier this year, the company had tried to include a controversial provision that would have forced shareholders to resolve claims through arbitration rather than through individual or class-action lawsuits.  Carlyle Group later agreed to drop the effort.

Late last year, the SEC scrutinized Groupon's financial disclosures, which included a metric that excludes marketing and other expenses from profit calculations.  The SEC review led to Groupon putting its IPO on hold for several weeks, and forced the company to change its accounting twice.    [Reuters, 2/24/12]