(The news featured below is a selection from the news covered in Federal Securities Law Reporter, which is distributed to subscribers of Federal Securities Law Reporter.)

PLI Panelists Review Developments in International Securities Markets

The Public Company Accounting Oversight Board's assistant director for international affairs, Karen Dietrich, reported that the staff has been able to resolve all of the disclosure problems it has encountered to date during inspections of foreign audit firms. About 770 foreign audit firms from 84 countries are registered with the PCAOB, all but one of which are small firms that are subject to a three-year inspection cycle. Ms. Dietrich also reported that the PCAOB recently concluded its first international auditor regulatory institute. Representatives from more than 40 countries attended the institute to learn about the PCAOB's program. Ms. Dietrich spoke at the recent Practising Law Institute conference on foreign issuers and the U.S. securities laws.

In 2007, Ms. Dietrich said the inspectors will be in 20 countries conducting inspections. Firms that register with the PCAOB to audit public companies must cooperate with the PCAOB inspections. Some countries prohibit the production of certain documents under confidentiality laws. She said the PCAOB has no specific rule about the means by which a firm must cooperate, but it may have to decline an engagement if it cannot obtain the necessary assurances from the audit client.

D.J.Gannon, with Deloitte & Touche, noted that a fair amount of diversity remains in international financial statements. It is not unexpected that companies will use different GAAPs under the guise of one, he said. This presents a real issue that is being worked out. The biggest challenge is to arrive at a common perspective, he said. Mr. Gannon characterized convergence as a process with harmonized benchmarks with everyone trying to get to the same place.

During a panel discussion on adapting to U.S. governance rules and executing audit committee responsibilities, Nicolas Grabar, with Cleary Gottlieb, said the conscientiousness of U.S. audit committees is a fairly recent development. For foreign companies, he questioned whether it is still less than genuine. Duncan Wiggetts, legal counsel for PricewaterhouseCoopers Eurofirms, responded that no one is giving tutorials on what it means to be an audit committee of a U.S. sister company. The European Union will become used to the concepts found in Section 10A reports and Section 404, he said.

Ethiopis Tafara, the SEC's director of the Office of International Affairs, said that global markets call for global rules. His office is pressing for the adoption of international financial reporting standards and is communicating with the SEC's counterparts about the necessary steps. Many fear that the SEC expects a certain degree of convergence or complete convergence before it will eliminate its reconciliation requirement. That is not so, according to Mr. Tafara. The SEC wants to see a process in place so that U.S. GAAP and International Financial Reporting Standards do not diverge.

By endorsing the consistent application of IFRS, Mr. Tafara said the SEC is telling the public that it believes it can live with two accounting standards, but not an extensive number of different systems. He believes the SEC's counterparts understand that position. The international community is building an infrastructure to accommodate IFRS, he said, and the recently signed protocol with the European Union ensures that the conversation will continue. In order to minimize conflicts, Mr. Tafara said that IOSCO and CESR have developed databases to help ensure consistent interpretations.

Edward Greene, the general counsel for Citigroup Global Corporate Investment Bank, talked about the recent article published by Mr. Tafara offering a blueprint for cross-border access. The article outlines a framework through which foreign exchanges and broker-dealers could seek an exemption from SEC registration based on their compliance with substantively similar foreign securities laws and regulations, and supervision by a foreign securities regulator. The SEC would retain its jurisdiction to pursue violations of the U.S. federal securities laws.

Mr. Greene said the proposal would only work if it started out on a pilot basis. He believes the proposal has gotten some traction, however. He said there is no way the SEC would agree to a lead regulator as far as enforcement, but believes coordination in other areas is possible. Mr. Tafara acknowledged the dangers of politicizing the process. He added that regulators would have to be creative in how comparability is measured. They may have to be willing to look at outcomes, as well as inputs, he said.