SEC Relaxes 'Fire Sale' Assets Rule

Aims to ease pressure by freeing assets from free-market value
By Peter Fearon,  Newser Staff
Posted Oct 1, 2008 3:23 AM CDT
Security and Exchange Commission Chairman Christopher Cox. The SEC is relaxing one of its rules that is putting additional pressure on banks and other companies.   (AP Photo/Charles Dharapak)
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(Newser) – The SEC is relaxing enforcement of a controversial rule in a bid to ease pressure on banks during the financial crisis, the New York Times reports. Current accounting rules require companies to value assets at a fluctuating fair market price. In the current financial chaos, values are rapidly heading south, forcing companies to report huge quarter-to-quarter losses. 

The SEC is not changing the rule, but will now begin interpreting the rule loosely enough to give companies some breathing room. “Investors can be well served if they understand that from quarter two to quarter three management has developed a different interpretation of fair value—and they provide a reconciliation of the change," said a securities analyst.