The Securities and Exchange Commission in the US has approved new rules imposing more obligations and restrictions on auditors and requiring public companies to make additional disclosures about off-balance- sheet transactions.
The agency, which took the action on Wednesday, also approved rules requiring executives at mutual funds to certify financial results and extending to seven years from five the period of time that accountants must retain copies of work papers related to audits. The new rules were passed unanimously by the agency's five commissioners. Compared with proposals made last year, the new rules are a significant softening of the SEC's stance toward the accounting profession. The rules were required by legislation passed last summer in response to a spate of corporate scandals; the new law gave the agency until Jan. 26 to approve the rules. The agency was expected to approve another set of rules on Thursday. These would impose new requirements on lawyers who appear before the SEC and would require mutual funds to disclose how they vote companies' shares on behalf of investors. Lawyers and executives of mutual funds have criticized some of the agency's proposals.
This week and last are the busiest two weeks of rulemaking in this agency's history, Harvey Pitt, chairman of the SEC, said at the start of the agency's meeting on Wednesday. Pitt remains chairman of the agency although he announced his resignation in November after a wave of criticism of his handling of the selection of members for a new oversight board for the accounting industry. William Donaldson, a former chairman of the New York Stock Exchange, has been selected to replace Pitt. The final rules drew quick criticism from some Democrats, including Representative Edward Markey of Massachusetts.
The SEC abandoned the tough reforms needed to restore investor confidence in the aftermath of last year's corporate scandals, Markey said. Instead, the Republican-controlled commission has watered down badly needed reforms and sided with the accounting industry at the expense of ordinary investors.