October 8, 2003

SEC Proposes Rules on Shareholder

Although the SEC has not yet issued a rulemaking release (expected Friday) – but there is a press release – about its meeting this morning, the Commission did vote unanimously to propose rules allowing for shareholder access to corporate proxies. At the meeting today, Commissioner Harvey Goldschmid raised the question — addressed in summary fashion by the SEC’s General Counsel — of the Commission’s authority to regulate in this area. Commissioner Paul Atkins also appeared highly engaged with this issue. The SEC seems to be expecting a legal challenge on authority grounds to any access proposal it adopts, and we look forward to more on this angle of the rulemaking.

The SEC has put the proposal out for a 60-day comment period (following its official publication in the Federal Register).

Ethical Accountants

With the PCAOB, among others, continuing to spotlight the importance of accountants’ professional standards, at least one state has also stepped in to make it clear that the stakes have indeed been raised. The New York State Society of Certified Public Accountants announced on September 25 that it has adopted a bylaw amendment that requires its professional ethics committee (PEC) to share ethics violations with state and federal regulatory authorities. The PEC may even inform regulatory authorities about its investigations before a final determination is made about the alleged ethics violations. The new bylaw also requires the PEC to turn over all statements and other materials relating to the investigation, or copies thereof, requested by the regulatory authorities. New York is the first state society to adopt such an extensive referral process.

EC Adopts International Accounting Standards

On September 29, the European Commission adopted a regulation endorsing International Accounting Standards (IASs), including related interpretations, thereby confirming their compulsory use starting in 2005 under the terms of the general IAS Regulation adopted by the European Parliament and the Council in 2002. The regulation requires listed companies, including banks and insurance companies, to prepare their consolidated accounts in accordance with International Accounting Standards from 2005 onwards.

PCAOB Likely to Rebuff European Plea for Auditor Equality

As reported in the Financial Times today, Chairman William McDonough of the PCAOB is meeting next week with representatives from the European Union. McDonough has indicated that the PCAOB is unlikely to stand down on inspections of European audit firms in the near term. Chairman McDonough also indicated to the FT that the PCAOB was planning to review the independence implications raised by accountants providing tax services to their audit clients, although the Board has not set any specific time table for that review.

— Posted by Kimberley Drexler