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

Glassman Emphasizes Importance of International Dialogue

Commissioner Cynthia Glassman, in remarks at a conference in Copenhagen , Denmark , gave assurance of the SEC's commitment to the U.S.-EU financial markets regulatory dialogue that began in 2002 after the adoption of the Sarbanes-Oxley Act. The dialogue provides a cooperative forum in which international financial regulators and government entities can address matters of mutual concern, including ways to ease the regulations that affect issuers in their home countries and abroad. Glassman said there are clearly areas in which modifications may be appropriate, but she believes that the Sarbanes-Oxley Act, overall, has raised the standards of corporate behavior and has restored investor confidence.

Glassman addressed section 404 of the Act, noting that it has gained the most criticism of all of the Act's provisions. The purpose of the section is laudable she said, which is to ensure that a company's financial statements are reliable and materially accurate, but the costs and burdens of implementation have exceeded expectations. Glassman said she remains concerned about the costs of section 404 and, if the costs do not go down, she said the SEC and the PCAOB should consider ways to make it more effective and less burdensome. That may entail a reconsideration of the PCAOB's Auditing Standard No. 2, she added. Glassman said she is also receptive to recommendations for modification of the section 404 process for smaller issuers, both domestic and foreign.

With respect to the international convergence of accounting standards, Glassman reported that the staff has begun a survey to assist in the consideration of eliminating the current reconciliation requirement. However, since the use of international financial reporting standards has just begun, the analysis is in its very early stages. The staff will continue to pursue the roadmap outlined by former SEC Chief Accountant Donald Nicolaisen that will lead to the eventual acceptance of IFRS in the U.S. without reconciliation, she said.

Another SEC initiative involves the issue of deregistration. Glassman acknowledged the criticisms of the SEC's requirement that issuers continue to file reports with the SEC as long as they have 300 or more U.S. resident shareholders. The 300-shareholder requirement was adopted in 1968 when there was much less cross-border investment activity, she said. The staff has taken a fresh look at the deregistration process in response to the foreign issuer community and plans to make a recommendation in the coming weeks. Glassman said the criticisms are valid and she hopes the recommendation will provide an adequate response.

Glassman also discussed the SEC's proposed definition of nationally recognized statistical rating organizations. Beyond the staff's designation of the NRSRO status, Glassman said the SEC's authority to regulate credit rating agencies is limited by the lack of legislative authority. She noted that the NRSRO community has begun to develop a voluntary framework similar to the code of conduct adopted by the International Organization of Securities Commissions. The voluntary framework would include a limited form of SEC oversight, she explained. While there has been some Congressional interest in regulating credit rating agencies, including the introduction of draft legislation last summer, Glassman said she cannot predict the outcome. Issues relating to the oversight of credit rating agencies are of critical importance to the SEC, she said, just as they are to the EU

Glassman believes that a key international concept is cooperation. Cooperation through information sharing and a continued dialogue is the best way to combat fraud and to achieve efficient global markets, she concluded.