SEC Offering Amnesty for Independence Violations

The SEC has initiated a look-back program in which all participating accounting firms will subject themselves to independent scrutiny of their financial independence with regard to their audit clients. Participating firms as well as their clients will be provided with a safe harbor from enforcement unless certain serious violations occurred.

The look-back program is entirely voluntary, but it is hoped that the amnesty incentive will provide the necessary encouragement for firms to participate. All of the Big 5 accounting firms have agreed to participate in the program.

According to Arthur Levitt, Chairman of the SEC, the result of the program will be to "enhance investor confidence and will lead to improved quality control systems."

The program stipulates that investments of audit partners, non-audit partners, managerial and professional employees, and their spouses and dependents, will be examined for the nine-month period ending 3/31/00. The examination will occur between June 15, 2000 and June 15, 2001, with reports due to the SEC by July 15, 2001.

Prohibited investments include direct investment in securities of an SEC audit client, prohibited loans with an SEC audit client, and certain employee-benefit-plan accounts holding securities of an SEC audit client.


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