WASHINGTON, D.C. — As the Senate neared passage of landmark corporate reform legislation Monday (S. 2673), the Consumer Federation of America (CFA) hailed the legislation as a significant advance over companion legislation in the House. However, CFA warned that the bill had been already been weakened before moving to the Senate floor and represented the bare minimum that was needed to help restore investor confidence.
“Investor confidence has been badly shaken in recent months by the realization that our system of corporate governance, long heralded as the best in the world, is not adequate to ensure that investors receive reliable information about the companies in which they invest,” said Barbara Roper, CFA’s director of investor protection. “The Senate bill takes the comprehensive approach that is needed to reform the system and restore investor trust. As such, it stands in stark contrast to both the House bill and the administration agenda, as outlined in the president’s recent speech.”
CFA praised the bill for: creating a strong new regulator to oversee the audits of public companies; including measures to enhance auditor independence and strengthen corporate board oversight of the audit; reducing the incentives for corporate executives to make misleading disclosures; providing greater accountability, including strong criminal sanctions, when they do; lengthening the statute of limitations for securities fraud; enhancing the independence of the Financial Accounting Standards Board; and authorizing a significant funding increase for the Securities and Exchange Commission.
“While we are concerned that the bill does not go as far as it should to ensure the independence of the new oversight board or to enhance the independence of the audit, it is still by far the best proposal on the table,” Roper said. She noted that the public process of a floor debate had discouraged those intent on weakening the bill but unwilling to do so in public. “Unfortunately, the behind-closed-doors negotiations of a conference committee offer a more congenial environment for the opponents of real reform,” she said.
That is of particular concern, Roper said, because the House bill offers “sham reform,” and the administration continues to express its support for the House bill. She criticized the House bill, in particular, for doing nothing to enhance auditor independence beyond what the major firms have said they wouldn’t oppose and creating a weak new regulator “custom-designed for domination by the very accounting profession it is supposed to regulate.”
Contact:
Barbara Roper, (719) 543-9468
Travis Plunkett, (202) 387-6121
CFA is a non-profit association of 300 pro-consumer groups that was founded in 1968 to advance the consumer interest through advocacy and education