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PCAOB Approves a Budget Increase

While the talk in Washington is now focused on a pay freeze for federal workers, the PCAOB has announced its approval of a $204.4 million budget, which represents an 11.5% increase over the 2009 budget. The increase is accounted for in part by the new oversight responsibilities that the Dodd-Frank Act has conferred on the PCAOB, which will now have to oversee the audits of broker-dealers. The Board notes that “the majority of new expenses in the 2011 budget are increases in staffing, information technology and facilities. The need for these additional resources is largely the result of certain changes in the Board’s 2011 responsibilities and programs, including: (1) the commencement of a program to oversee broker-dealer audits, (2) enhanced requirements for performing and documenting PCAOB inspection work, and (3) a potential increased number of litigated enforcement proceedings.” In addition to the budget, the Board also approved a strategic plan for 2010-2014. The PCAOB budget now goes off to the SEC for approval.

Relief Extended for Credit Ratings in Asset-Backed Offerings

Last week, the Corp Fin Staff issued a new no-action letter to Ford Motor Credit and a related entity, extending the relief originally provided back in July following enactment of Section 939G of the Dodd-Frank Act, which specified that, effective July 22, 2010, Securities Act Rule 436(g) shall have no force or effect. The relief contemplated in the original letter was set to expire with respect to any registered offerings of asset-backed securities commencing with an initial bona fide offer on or after January 24, 2011. The Staff now states that “[p]ending further notice, the Division will not recommend enforcement action to the Commission if an asset-backed issuer as defined in Item 1101 of Regulation AB omits the ratings disclosure required by Item 1103(a)(9) and 1120 of Regulation AB from a prospectus that is part of a registration statement relating to an offering of asset-backed securities.”

On the same day last week, the Commission issued an order extending a temporary conditional exemption for NRSROs from the requirements of Exchange Act Rule 17g-5, which deals with conflicts of interest in connection with the issuance of credit ratings for structured finance products. The temporary conditional exemption will run through December 2, 2011. The Commission also continues to seek comments on this already effective rule.

– Dave Lynn