[Federal Register Volume 69, Number 40 (Monday, March 1, 2004)]
[Notices]
[Pages 9654-9655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4435]
[[Page 9654]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49302; File No. SR-Amex-2003-86]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto by the American Stock Exchange LLC
To Amend Section 605 of the Exchange's Company Guide Relating to the
Requirements Applicable to Listed Company Auditors
February 23, 2004.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 3, 2003, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
items I, II and III below, which items have been prepared by the
Exchange. On January 22, 2004, the Exchange submitted an amendment to
the proposed rule change.\3\ The Commission is publishing this notice
to solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Eric Van Allen, Assistant General Counsel,
Amex, to Nancy Sanow, Assistant Director, Division of Market
Regulation, Commission, dated January 21, 2004, replacing Form 19b-4
in its entirety (``Amendment No. 1''). In Amendment No. 1, the Amex
made technical changes to its proposed rule text and discussion.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend section 605 of the Amex Company
Guide with respect to the requirements applicable to listed company
auditors. The text of the proposed rule change, as amended, is set
forth below. Text in brackets indicates material to be deleted, and
text in italics indicates material to be added.
* * * * *
American Stock Exchange LLC Company Guide
Sec. 605 [Peer Review] Auditor Requirements
[(a) A listed company must be audited by an independent public
accountant that:
(i) has received an external quality control review by an
independent public accountant (``peer review'') that determines whether
the auditor's system of quality control is in place and operating
effectively and whether established policies and procedures and
applicable auditing standards are being followed; or
(ii) is enrolled in a peer review program and within 18 months
receives a peer review that meets acceptable guidelines.
(b) The following guidelines are acceptable for the purposes of
Sec. 605:
(i) the peer review should be comparable to AICPA standards
included in Standards for Performing on Peer Reviews, codified in the
AICPA's SEC Practice Section Reference Manual;
(ii) the peer review program should be subject to oversight by an
independent body comparable to the organizational structure of the
Public Oversight Board as codified in the AICPA's SEC Practice Section
Reference Manual; and
(iii) the administering entity and the independent oversight body
of the peer review program must, as part of their rules of procedure,
require the retention of the peer review working papers for 90 days
after acceptance of the peer review report and allow the Exchange
access to those working papers.]
A listed company must be audited by an independent public
accountant that is registered, as required, with the Public Company
Accounting Oversight Board (``PCAOB'').
Commentary
.01 In evaluating the eligibility of an issuer which has applied
for listing, the Exchange will only consider financial statements
provided in connection with the application and relied upon to
demonstrate compliance by the applicant, if such financial statements
were audited or reviewed, as required by applicable SEC requirements,
by an independent public accountant that was, at the time of issuance
of such financial statements, either registered with the PCAOB, or, for
financial statements issued prior to the time the auditor was required
to register with PCAOB, enrolled in the American Institute of Certified
Public Accountants (``AICPA'') or equivalent peer review program.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Currently, section 605 of the Amex Company Guide requires Amex
listed companies to be audited by an independent public accountant that
participates in a peer review program, i.e., an external quality
control review by an independent public accountant that determines
whether the auditor's system of quality control is in place and
operating effectively and whether established policies and procedures
and applicable auditing standards are being followed. In practice,
section 605 of the Amex Company Guide requires that the auditor either
be a member of the American Institute of Certified Public Accountants
(``AICPA'') SEC Practice Section, which subjects the auditor to the
AICPA peer review program, or be enrolled in a peer review program with
comparable standards.
Pursuant to the Sarbanes-Oxley Act of 2002 (``Sarbanes-Oxley
Act''), the Public Company Accounting Oversight Board (``PCAOB'') was
created to regulate accounting firms that prepare and issue audit
reports on public companies that are either required to file reports
with the Commission or that have filed a registration statement for a
public offering of securities (together, ``public companies''). The
Sarbanes-Oxley Act further provides that 180 days after the Commission
determines that the PCAOB is capable of carrying out its
responsibilities, accounting firms that are not registered with PCAOB
would be prohibited from preparing or issuing audit reports on public
companies. In accordance with recently approved PCAOB rules, U.S.
accounting firms were required to register by October 22, 2003.\4\
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\4\ Pursuant to PCAOB rules, foreign public accounting firms
have been granted an additional 180 days to register (i.e., until
April 19, 2004).
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Accordingly, the Exchange proposes to revise section 605 of the
Amex Company Guide to specify that Amex listed companies must be
audited by an accounting firm registered, as required, with the PCAOB.
New commentary to section 605 would also clarify that, in evaluating
the eligibility of an issuer which has applied for listing, the
Exchange would only consider financial statements provided in
connection with the application and relied upon to demonstrate
compliance by the applicant, if such financial statements
[[Page 9655]]
were audited or reviewed, as required by applicable Commission
requirements, by an independent public accountant that was, at the time
of issuance of such financial statements, either registered with the
PCAOB, or, for financial statements issued prior to the time the
auditor was required to register with PCAOB, enrolled in the AICPA or
equivalent peer review program.
In evaluating either the initial or continued listing eligibility
of an issuer, the Exchange would consider the extent to which any PCAOB
regulatory finding or action, a modified or adverse peer review
opinion, or other regulatory issue with respect to a listed company's
auditor raises concerns with respect to the reliability or integrity of
the company's financial statements. As warranted, the Exchange would
take action pursuant to its general authority to exclude issuers
raising public interest concerns from listing (i.e., sections 101 and
1003(f)(iii) of the Amex Company Guide) to either deny the listing
application or delist the issuer.\5\ In determining whether a public
interest concern exists, the Exchange would consider the substance of
the issue(s) raised, the independent accountant's response, including
whether corrective action was taken, as well as any follow-up review or
action by PCAOB or AICPA.
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\5\ Any such action would be subject to appropriate appeal
procedures as set forth in Part 12 of the Amex Company Guide.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \6\ in general, and furthers the
objectives of section 6(b)(5) of the Act \7\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will impose no
burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Persons making written
submissions should file six copies thereof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 20549-0609. Comments may also be submitted electronically at the
following e-mail address: [email protected]. All comment letters
should refer to File No. SR-Amex-2003-86. This file number should be
included on the subject line if e-mail is used. To help the Commission
process and review your comments more efficiently, comments should be
sent in hard copy or by e-mail but not by both methods. Copies of the
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for inspection and copying in the Commission's
Public Reference Room. Copies of such filing will also be available for
inspection and copying at the principal office of the Exchange. All
submissions should refer to file number SR-Amex-2003-86 and should be
submitted by March 22, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4435 Filed 2-27-04; 8:45 am]
BILLING CODE 8010-01-P