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By David Dayen, a lapsed blogger who writes at Salon, The Intercept, The Fiscal Times and more. Follow him on Twitter @ddayen

The heart of the SEC’s mission is disclosure, which means providing enough information to investors so they can make sound choices when they buy stocks and bonds. Without disclosure you don’t really have an SEC, and you put investors – and potentially the whole economy – at risk. Weak securities disclosure enables financial fraud. That was the big, costly lesson of the Roaring Twenties and the enormous stock market bubble and disastrous crash that resulted. The SEC’s raison d’etre is to serve as a major bulwark against that ever happening again.

But the commission is striving to hit that self-destruct button, by allowing new rules that would make it much easier for companies to hide their activities. It’s highly likely that this effort reaches all the way to the office of SEC Chair Mary Jo White.

At issue is the standard of “materiality,” whether or not information is germane enough to be disclosed in financial statements. The SEC designates responsibility for setting this standard to the Financial Accounting Standards Board (FASB), a private-sector organization created in 1973 to establish and update the nation’s Generally Accepted Accounting Principles (GAAP). Here’s the FASB’s longstanding materiality guideline:

The omission or misstatement of an item in a financial report is material if, in the light of surrounding circumstances, the magnitude of the item is such that it is probable that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item.

But a few weeks ago, on September 24, FASB published two drafts for public comment, one to update FASB’s Conceptual Framework, and the other an Accounting Standards Update to clarify it for corporate management. FASB said the updates would “improve the effectiveness of disclosures in notes to financial statements.”

It’s important to recognize that notes in financial statements are absolutely critical to understanding a 10-K or any other report. Companies are required to give various explanations on taxes, debt structure, impending litigation, etc. Without these notes you have no idea what’s really going on in the company.

FASB wants us to believe that this is a mere technical fix to alleviate confusion. But what it really would do is change the definition of materiality. This is from FASB Chairman Russell Golden:

Stakeholders indicated that the current discussion of materiality in our Conceptual Framework is inconsistent with the legal concept of materiality as established by the U.S. Supreme Court… This led to uncertainty about organizations’ abilities to interpret what disclosures are material; and the Board’s ability to identify and evaluate disclosure requirements in accounting standards.

The Supreme Court’s materiality standard is applied under SEC Rule 10b-5, a rule that targets securities fraud. It comes from a 1988 case, Basic v. Levinson, which determines materiality as whether a reasonable investor would have viewed whatever was undisclosed as something that would have altered the “total mix” of information about the company.

That’s pretty similar to the current FASB standard. But think about it. Basic v. Levinson defines when a lack of disclosure rises to the level of securities fraud. That’s necessarily a higher standard than the positive obligation to disclose. “I want to know more as an investor than what it would take for the thing to be a fraud,” said Damon Silvers, policy director at the AFL-CIO. The legal standard, then, creates a higher threshold for materiality – though nobody really knows how high – subject to the whims of the company and its auditor. And every time the courts tinker with the standard – and we know the pro-corporate tilt of this Court – the materiality standard would change.

Lynn Turner, a former Chief Accountant of the SEC who is now a trustee for the Colorado Public Employee Retirement Association, gave me an example of a materiality question from his time at the commission, which concerned McDonald’s. “They were in the process of redoing all the kitchens in their stores to make them more efficient and cleaner,” Turner told me. “They decided they would do it, but they needed the cash to do it, which took about 3-4 years.” During this time, instead of changing the depreciation value of how long their stoves, sinks and ovens would actually last, McDonald’s kept them at the same rate, making the company look more profitable by creating no awareness of future capital expenditures.

Turner became aware of this and got on a call with McDonald’s and their auditor, Ernst & Young. “I asked McDnonald’s, why didn’t you correct the accounting? They said, if we fix it, we’re going to miss the estimate for earnings that we gave to the Street. Well, you’re the idiots that came up with the estimate!” Ernst & Young said they informed McDonald’s of the issue, but the company didn’t want to disclose, and anyway it only amounted to a penny a share, so they agreed to let it go.

“I told the CFO, call me back and tell me what you will tell investors about why this was OK,” Turner said. “The next day, there’s a press release in the Wall Street Journal. Obviously it was material because the guy didn’t want to tell his investors!”

These judgment calls take on new significance when the materiality threshold is set higher. It gives companies far too much leeway to goose their stock by hiding things they’d rather not tell investors. This opaqueness on balance sheets is arguably part of what led to the 2008 crisis, and certainly relevant to the accounting scandals of Enron and WorldCom. Only now, such lack of disclosure would be allowable. “Raising materiality limits would be terrible for investors,” Lynn Turner said, “giving a pass to management who put out bad, incorrect and misleading numbers.”

“If Lynn Turner is concerned I’m concerned,” noted Barbara Roper of the Consumer Federation of America, who added that this change has been on the agenda of the corporate and auditing community for a while. The proposal comes out of FASB’s “disclosure framework project,” established in 2009. “There’s a sense that the project is not being driven by a conversation with investors about what would make disclosures more effective, and more by a conversation with issuers and auditors,” Roper said. The SEC has a similar project, established by Mary Jo White, through the division of Corporation Finance, which monitors financial statements at the SEC. That project too, investor advocates suspect, is designed to relieve disclosure “burdens” on business, meaning let them say less and get away with a lot more.

Last Thursday, at a meeting of the SEC’s Investor Advisory Committee (IAC), which was created in Dodd-Frank to give outside perspectives on the commission’s work, participants all but accused FASB of engaging in a bait and switch. The IAC hauled in the SEC’s Chief Accountant, Jim Schnurr, to question him about the proposal. The Chief Accounting Office has oversight responsibility for FASB.

Schnurr was a longtime partner in the national office of Deloitte, one of the Big Four auditing firms. He has a history of attempting to soften rules for his industry friends. By the way, Russell Golden, the chair of FASB, also was a partner at Deloitte. Same with vice chair James Kroeker. Sensing a theme?

While not officially supporting the proposal, Schnurr took the FASB line. “There were questions on how you apply materiality to disclosures,” he said. “This is not intended to change that but make it more clear.” He used the example of a large company with a single small pension plan that was not material to financial statements, and whether they could omit that without it being seen as an accounting error. “It’s intended to provide management with the flexibility about what they think is important to investors.”

But the IAC went to town on Schnurr. “Is this a clarification of what materiality was all along,” said Roy Katzovicz, chairman of private investment group Saddle Point, “or a change in the standards, such that it’s a less sensitive standard that would allow for less disclosure?”

Schnurr said he thought the rule was not intended to reduce disclosure. But Katzovicz replied that “the mix of total information,” the language from the Supreme Court, “is a higher materiality standard. If that’s not intended by the FASB, they need to go back.”

Katzovicz wondered if lawyers would now decide what ends up in the notes to financial statements, nimbly sidestepping the legal definition. “If we get rid of low-level, not valuable disclosures, that’s fine,” added Joe Carcello of the University of Tennessee. “If they are valuable disclosures, that would be a bad thing. To make this change without thinking about that is fraught with risk.”

While the IAC appeared unclear on exactly how critical this change would be, not one member who spoke up at the meeting was satisfied with the FASB proposal or the Chief Accountant’s defense of it. “When you change the broad terms of the definition of materiality, you’re potentially making a large change, whether you think you’ve got it right or not,” said Damon Silvers at the meeting. “The feeling of this body is that more disclosure is better than less in general. The clear drift of this is in the other direction.”

The Chief Accountant absolutely has the ability to shut this down, said former Chief Accountant Lynn Turner, who in 1999 put out his own staff bulletin on materiality, backing up the original FASB standard. “If the FASB proposal would change in any manner the longstanding guidance put out by the SEC, unequivocally the Chief Accounting Office should say no, you can’t do it.” So if Schnurr does nothing, he would absolutely be abetting this.

Which leads us to the question of who’s driving this change. We know the FASB disclosure framework has been driven by corporations. We know Schnurr, who has never worked on behalf of investors, appears more concerned with softening up the rules for industry. And we know that Schnurr is personally very close to John White, Mary Jo White’s husband and a corporate lawyer with Cravath.

White is on the Standing Advisory Group of the Public Company Accounting Oversight Board (PCAOB), and was recently part of the advisory group for FASB. He was the previous head of the division of Corporation Finance in the laissez-faire Christopher Cox days. The current head of CorpFin, Keith Higgins, used to work for John White there, and he’s been focused during his tenure on “improving” disclosure.

John White has been accused of spearheading the effort to undermine and kick out Jim Doty, the head of the PCAOB, who has strived to police auditors. Progressive organizations have asked Mary Jo White to recuse herself from choosing the next PCAOB chair, because of the conflict of interest with her husband. Jim Schnurr, meanwhile, has described Doty as “too focused on its disclosure efforts and not enough on enacting rules to govern the nuts and bolts of conducting audits.”

Mary Jo White herself has talked about “reforming” disclosure for years, citing an “information overload” in financial statements. The day after FASB’s proposal, the SEC put out a request for comment to review Regulation S-X, which governs disclosures. And all of White’s top advisors on commission staff come from a business background. “Can you name any person at the SEC motivated by the desire to advocate for investors?” Barbara Roper asked.

Put this together and you have FASB, the Chief Accounting Office, the division of Corporation Finance, CEOs, auditors, lawyers and even the SEC Chair all moving in the same direction – to reduce disclosure. And the materiality threshold represents their opportunity. If this were vetted by people with serious credibility, who had investor protection at the forefront of their efforts, that’s one thing. But for this proposal to bubble up from committees and individuals with clear ties to big business makes it look suspiciously like Mary Jo White and her minions want to undermine the SEC from within.

Schnurr left it at the IAC meeting that they would “take into account” the committee’s comments as they work with FASB. “He didn’t appear to be persuaded by our arguments,” Barbara Roper said. The public comment period for the FASB proposal lasts until December 8, so anyone who wants to see corporate disclosures maintain their integrity can submit their remarks.

“This is a very significant issue,” said Lynn Turner. “It runs to the heart of the credibility of financial statements.”