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ICI Calls for “Equitable Allocation” of Accounting Support Fee Mandated by Sarbanes-Oxley Act
Washington, DC, December 23, 2002 - The Institute recently submitted a comment letter to the SEC regarding Section 109 of the Sarbanes-Oxley Act of 2002, which authorizes the Public Company Accounting Oversight Board (PCAOB) and other accounting standard setting bodies to assess reasonable fees on issuers to fund their operations. Section 109 requires that accounting support fees be based on each issuer’s average monthly equity market capitalization, provided that fees assessed may differentiate among classes of issuers in order to ensure their equitable allocation.
The Institute notes that the PCAOB and other regulators will likely devote substantially less time and resources to investment company matters than they will to operating company matters—due to the relatively simply and straightforward accounting and auditing processes applicable to investment companies—and recommends that registered investment companies be recognized as a separate class of issuers and that they be assessed accounting support fees at lower rates than operating companies.
The pointed out that the stringent regulation of investment companies under the Investment Company Act of 1940, combined with the Commission’s on-site inspection program, reduce significantly the likelihood of accounting irregularities and audit failures in the fund industry. The 1940 Act, for example, imposes substantive regulation on funds that goes far beyond the disclosure and anti-fraud provisions found in the other major federal securities laws.
The Institute has long supported legislative and regulatory efforts to ensure effective accounting oversight and to improve corporate governance. Most recently, the Institute expressed support for proposals that would enhance investors’ abilities to understand how issuers finance their operations, comprehend the risks that are not always apparent in financial statements, and compare an issuer’s financial information with other reporting periods and with other companies.