FOR IMMEDIATE RELEASE:

CONTACT: Jesse Jacobs - 202-224-4524
Monday, July 15, 2002

Craig Davis - 202-224-7391


REMARKS OF SENATOR PAUL S. SARBANES (D-MD) CHAIRMAN, SENATE
BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE ON THE PASSAGE OF
THE "PUBLIC COMPANY ACCOUNTING REFORM AND INVESTOR
PROTECTION ACT OF 2002

Today the Senate took a major step - an essential step - toward restoring confidence in our capital markets. By a unanimous vote, the Senate has approved the Public Company Reform and Investor Protection Act. I want to thank the Majority Leader for his astute leadership in moving this bill, and for his eloquent statement just prior to the vote. I want to acknowledge the critical role that Senators Dodd and Corzine played in shaping this legislation, and I want to thank Senator Enzi for the commitment and experience he brought to making this bill a truly bipartisan effort. I also want to thank Chairman Leahy of the Judiciary Committee for bringing his major criminal fraud amendment to a unanimous vote and all my colleagues on the Banking Committee.

For nearly seventy years, our framework of securities laws has proved remarkably effective at protecting investors. Recent events, though, have shown how urgently this framework needs reform. We must ensure that investors can once again trust corporate executives and their financial reports, and have confidence in the independence of accountants and analysts. We also must assure that the SEC has adequate funds to carry out its mandate. This legislation achieves these goals.

  • It establishes a strong independent board to oversee auditors of public companies. The board has the authority to set standards, and to investigate and discipline accountants. Overseen by the SEC, it will have independent funding and membership. This will mark the end of weak self-regulation on the part of public company auditors.
  • Addressing pervasive conflicts of interest, it ensures auditor independence by restricting auditors from providing many consulting services. This practice must be stopped. Where they are still permitted, they must be pre-approved by the company's audit committee.
  • It strengthens corporate responsibility, requiring CEOs and CFOS to be personally responsible for the accuracy of their company's financial reports, and requiring auditors to report directly to the board representing shareholders rather than to management.
  • It establishes safeguards to protect against investment analysts' conflicts.
  • It gives the SEC the expanded staff resources that the Commission must have to carry out its mandate of protecting investors in this critical time.
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    It is no exaggeration to say that the crisis in our markets has put the plans and hopes and dreams of millions of Americans at risk. To restore market integrity on which investor confidence depends, we must move expeditiously to enact this legislation into law.

    We stand ready to send this bill to the President promptly. The Senate conferees will soon be appointed. The conference can be expedited if the House takes up and passes the Senate bill. Such a procedure would enable us to have this urgently needed legislation on the President's desk before the August recess. I hope it will prove possible.

    Some have suggested that, because the House and Senate bills differ significantly in their reach and approach, the legislation will be substantially rewritten by the conference committee. That would not serve the nation's best interests.

    When the House acted three months ago, we did not yet know the full depth and extent of the problems. Events have now moved beyond the reach of that bill. With all respect for my colleagues in the House, the Senate bill comes to grips with the problems that Americans now face as they try to plan for the future.

    The Senate bill has received a resounding bipartisan mandate. It is the result of genuine, good-faith consultation and negotiation over many weeks, between Democrats and Republicans. It is the product of many weeks of careful and deliberate hearings. The House bill was reported out of committee before the full scope of the problems was known, and passed with little debate. It is limited in scope, and falls short on the key issues of a strong independent board, auditor independence, corporate responsibility, and analyst conflicts.

    To restore the integrity of the markets, we must act decisively to get the Senate bill to the President. Americans must know that they can save with confidence for their children's education or for retirement - that they can look ahead confidently to the future. They deserve and demand no less.

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