SEC Ruling – ‘We need to restore public confidence’.

The 75-day period for comments and testimony on the proposed rules is over, what is the next step and when do you expect a decision to be made?

The Commission is going through the letters of comment – nearly 4,000 of which have been received – and evaluating the testimony that was given at four public hearings around the country. And we are presently meeting with the heads of all the Big Five firms as well as Barry Melancon of the AICPA, and we are endeavouring to tailor the rule in a way which would be responsive to the various inputs that I’ve just mentioned. My guess is that the final rule will develop over the course of the next 30 to 60 days.

Why do you think the proposal has been met with such opposition and did the SEC expect the profession to react in this manner?

I think the rule has been supported by a large part of the profession and a certain part of the profession has opposed it. I think any rule-making that deals with business practices generally evokes differences of opinion, and I’m trying very hard to deal with those differences and come up with a rule all of us would agree would be in our common interest.

Many, including the AICPA, are concerned about what impact this proposal will have on small businesses, what is your response to that concern?

I share your feeling that any rule cannot impact on small accounting firms and should not impact small accounting firms, and I believe that this rule will eventually have no negative impact on the small firms in the country.

I believe this rule the way it will eventually have no negative impact on the smaller firms of the country. I believe that the notion that state regulators will embrace all aspects of this rule and apply them to small firms is simply not accurate and would be totally inappropriate.

Almost every federal rule has historically been applied in different fashions to small business as it has to large business. I’m going to see to it that the rule incorporates that warning. I’m going to meet with smaller firms as I have over recent weeks to talk about and see if we can put some quantitative standards into the rule which would insulate the bulk of small firms from any impact of this rule.

Last month, PricewaterhouseCoopers and Ernst & Young submitted a proposal of their own. Does the Commission plan on adopting any elements of their proposal?

A. I think that the proposal that has been studied by the commission that PricewaterhouseCoopers and Ernst & Young have put forward is a very good one, and I think that the commission’s outcome will probably come very close to the recommendations of those two firms, as well as the three firms that we are presently talking about our rules.

The SEC has been bashed for allowing only 75 days for comments and testimony.

What is your response to that concern?

This issue has been with the commission for more than 25 years … We’ve had an extraordinary number of public comment letters – close to 4,000 of them. We’ve had an extraordinary number of public hearings around the country – four of them. And the 75-day comment period is the more than all the 20% of rules that the commission has put forward over the past two years.

I think it is important to restore public confidence as rapidly as possible, and I believe that the time period plus the history behind this plus the length of the extent of public comment on it is something that will give adequate opportunity for everybody to be heard and factor those views into our final rule.

In your speech before the council, you made some suggestions for the AICPA, can you elaborate on those suggestions?

Those suggestions essentially were to embrace the recommendations of a committee that the AICPA helped to establish the committee on order effectiveness … and to embrace those recommendations with respect to the public oversight board. And I also made some suggestions about increasing the number of public members on the regulatory body of the AICPA as well as considering adding public members to the board of the AICPA itself.

For the outcome of Wednesday’s SEC hearing see

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