(The news featured
below is a selection from the news covered in Federal Securities Law Reporter,
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Securities Law Reporter.)
SEC Announces Advisory Committee on Reporting Improvements
SEC Chairman Christopher Cox announced the establishment of
an advisory committee that will examine the U.S. financial reporting system with
the goals of reducing unnecessary complexity and making information more useful
and understandable for investors. The advisory committee will study the causes
of complexity and recommend to the Commission how to make financial reports
clearer and more beneficial to investors, reduce costs and unnecessary burdens
for preparers, and better utilize advances in technology to enhance all aspects
of financial reporting.
Our current system of financial reporting has become
unnecessarily complex for investors, companies, and the markets generally,
Chairman Cox said, noting that the time is ripe to review how that system can be
made less complex and more useful to investors. Robert C. Pozen, chairman of MFS
Investment Management in Boston and former vice chairman of Fidelity
Investments, will chair the SEC's advisory committee. Chairman Cox said he
expects between 13 and 17 additional members with varied backgrounds to be named
to the advisory committee within the next few weeks.
In addressing the complexity of the current system, our
advisory committee will focus not only on offering better guidance to preparers
of financial reports, but also on providing more user-friendly disclosures to
meet the different needs of various types of investors, Mr. Pozen said. SEC
Chief Accountant Conrad Hewitt said that the advisory committee will be studying
the very important subject of complexity and transparency in order to help
investors better understand the financial statements upon which they rely.
Chairman Cox said that the Commission will direct the
advisory committee to conduct its work with a view toward removing practical and
structural impediments that reduce transparency or unnecessarily increase the
cost of preparing and analyzing financial reports to the detriment of the
investor. The advisory committee will focus on several areas before making
recommendations to the Commission, including 1) the current approach to setting
financial accounting and reporting standards, 2) the current process of
regulating compliance by registrants and financial professionals with accounting
and reporting standards, 3) the current systems for delivering financial
information to investors and accessing that information, 4) other environmental
factors that drive unnecessary complexity and reduce transparency to investors,
5) whether there are current accounting and reporting standards that impose
costs that outweigh the resulting benefits and 6) whether this cost-benefit
analysis is likely to be impacted by the growing use of international accounting
standards. As part of its consideration of these areas, the advisory committee
will focus on how technology can help address accounting complexity by making
financial information more useful to a greater number of investors.
Chairman Cox noted that Chairman Robert Herz of the
Financial Accounting Standards Board and Chairman Mark Olson of the Public
Company Accounting Oversight Board have been instrumental in raising awareness
about the need to increase the usefulness of the financial reporting system. The
committee will begin its work after additional members are named and the SEC
staff files the committee's charter with Congress.
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