Compliance July 1, 2007

Committee to Suggest Financial Reporting Improvements to SEC

Securities and Exchange Commission (SEC) Chairman Christopher Cox on Thursday announced the establishment of an advisory committee to examine the U.S. financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors.
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According to a press release, Cox said the Commission will direct the SEC Advisory Committee on Improvements to Financial Reporting 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.
Issues on which the advisory committee will focus include:
  • the current approach to setting financial accounting and reporting standards;
  • the current process of regulating compliance by registrants and financial professionals with accounting and reporting standards;
  • the current systems for delivering financial information to investors and accessing that information;
  • other environmental factors that drive unnecessary complexity and reduce transparency to investors;
  • whether there are current accounting and reporting standards that impose costs that outweigh the resulting benefits; and
  • whether this cost-benefit analysis is likely to be impacted by the growing use of international accounting standards.
As part of its review, the advisory committee will consider how technology can help address accounting complexity and make financial information more useful to a greater number of investors. The committee will make recommendations to the SEC for making financial reports clearer and more beneficial to investors, reducing costs and unnecessary burdens for preparers, and better utilizing advances in technology to enhance all aspects of financial reporting.
Robert C. Pozen, chairman of MFS Investment Management in Boston and former vice chairman of Fidelity Investments, will chair the committee. Cox said he expects between 13 and 17 additional members with varied backgrounds to be named within the next few weeks.
The advisory committee will begin its work after additional members are named and the SEC staff files its charter with Congress.

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