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Tuesday, 18 June, 2002, 20:37 GMT 21:37 UK
SEC proposes strict watchdog panel
Enron HQ
The Enron scandal put the spotlight on accounting
The chief regulator of US stock markets has unveiled a plan to establish a new watchdog to help quell investor fears over questionable accounting practices by business.

The Securities and Exchange Commission (SEC) scheme calls for the establishment of a nine-member board, comprised of six independent members and three accounting professionals.

The Public Accountability Board (PAB), as it is to be called, would have the ability to impose stiff sanctions against accounting firms and individuals for improper conduct.

The SEC's move comes on the same day that the US Senate's banking committee approved an accounting reform bill that would establish an independent body to oversee accountants, similar to the SEC's proposal.

Congressional inaction

Under the SEC's plan, the new panel would be funded by accountancy members and public companies.

The new board would possess a wide variety of disciplinary powers, including the ability to impose fines and censures as well as to suspend from practicing before the SEC those accountancies in violation of its rules.

It would be funded by mandatory fees from accountancy firms and corporate audit clients, who would thus be more inclined to assist in investigations.

The SEC's move comes as a surprise, given that its current chairman, Harvey Pitt, has been criticised since his nomination to the post for his close ties to the accounting industry.

Mr Pitt, as an attorney, previously represented many of the US' largest accounting firms during his 20-year career in private practice.

While his proposal does not call for the PAB to have subpoena powers, it nevertheless would still be a far more powerful body than the one it replaces, the Public Oversight Board, which disbanded earlier this year.

The SEC has the power to establish such an arm in the absence of action on the part of Congress.

Senate proposal

Despite the widespread outrage among Americans in response to numerous accounting debacles, begun last autumn with the fall of energy-trader Enron, Congress has failed to present President George W Bush with legislation for accountancy reform.

On Tuesday, the Senate made some progress when its banking committee approved an accounting reform bill that would establish an independent oversight board, similar to the SEC's proposal.

The Senate plan would only pertain to the nation's publicly traded companies, which number about 15,000.

Senator Paul Sarbanes, a Democrat from Maryland, said the bill was necessary in order to restore investor confidence but questioned whether it would be passed by the full Senate.

Senator John Corzine, a member of the banking committee, told the BBC's World Business Report he believed the body would "bring real discipline to the auditing process of American companies" which he described as being "called into question" after events at firms such as Enron and Tyco.

Mr Corzine also said the body was important as real resources would be made available to the SEC to fully enforce the securities laws.

 WATCH/LISTEN
 ON THIS STORY
SEC chairman Harvey Pitt
"The system has needed adjustment and repair for a long time"
United States Senator John Corzine
"We are setting up an independent oversight body for the accountancy industry"
Securities Industry Assocation's James Spellman
"They are getting to the bottom of what happened"

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30 May 02 | Business
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