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

SEC Responds to Andersen Indictment

A federal grand jury indicted Arthur Andersen LLP for obstruction of justice. The indictment (SD Tex) charged the firm with withholding and destroying evidence in the financial fraud investigation involving Enron Corp. In response to the indictment, the SEC announced several regulatory measures designed "to assure a continuing and orderly flow of information to investors and U.S. capital markets and to minimize any potential disruptions" from the action. These actions are effective upon publication of the orders and rules on March 18, 2002.

The agency stated that it has received assurances from the firm that it will continue to properly audit financial statements in accordance with all applicable professional and firm auditing standards. Arthur Andersen clients must obtain certain representations concerning audit quality controls from the firm if the audits were completed by Arthur Andersen after March 14, 2002.

Firm clients that are unable to receive services from the firm to complete their audits or who choose not to have the firm complete audits currently in process must still meet existing filing deadlines. These issuers may, however, include unaudited financial statements if they are unable to provide timely audited financial statements because of the cessation of their audit relationship with Arthur Andersen. Issuers electing this alternative will generally be required to amend their filings within 60 days to include audited financial statements. The SEC stated that it will afford similar treatment to its reviews of interim financial statements.

This alternative framework will not be available in the case of initial public offerings, initial registrations under the Exchange Act, going-private transactions or roll-up transactions. The alternative framework will also be unavailable with respect to filings or transactions by any "blank check" companies or with respect to audits by Arthur Andersen that have been previously completed.

SEC Chairman Harvey L. Pitt stated that "any effects of the indictment are expected to be temporary." The Commission emphasized that "companies should make their own independent decisions regarding completion of current audits and that these actions are intended only to provide neutral flexibility for companies as they make those decisions." The SEC also provided agency telephone numbers and e-mail addresses for use by issuers, investors, auditors, broker-dealers, investment advisers and others with questions concerning this matter.

¨ U.S. v. Arthur Andersen, LLP (SD Tex) is reported at ¶91,719 . The SEC statement concerning its regulatory actions is reported at ¶86,620 . Release No. 33-8070 will be published in a forthcoming REPORT.