This was discussed by me and Luksy, because I was sure it had to be a translation error. It is made worse in the original localization if I recall. It's already been discussed somewhere else, but basically you are left with these 2 options:
1. Shinra personally congratulates all people who make it into Soldier, and Cloud is somehow expecting that he'll be remembered (Cloud says "long time no see", which is the main offending line). Shinra then tells him he can't be expected to remember every Soldier's name unless they are as great as Sephiroth. In other words, he meets every new member of Soldier for a very brief time to give out a medal or something.
2. This is forced exposition. The writers needed a way to introduce Sephiroth into the conversation. Think about it... how else were they going to get him mentioned here otherwise?
Personally I think it's probably both - but mainly number 2. The writers wanted to introduce Sephiroth here and had to manufacture something that seems very out of place. It's clearly bad exposition because no-one buys for a second that Cloud would say that out of nowhere. Which is why this thread exists
I guarantee you that this exposition will be left out of the remake, because they'll have a rethink.