[Congressional Record Volume 148, Number 2 (Thursday, January 24, 2002)]
[Senate]
[Pages S101-S102]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. GRAHAM (for himself and Mr. Nelson of Florida):
  S. 1894. A bill to direct the Secretary of the Interior to conduct a 
special resource study to determine the national significance of the 
Miami Circle site in the State of Florida as well as the suitability 
and feasibility of its inclusion in the National Park System as part of 
Biscayne National Park, and for other purposes; to the Committee on 
Energy and Natural Resources.
  Mr. GRAHAM. Mr. President, the city of Miami is constantly changing. 
New buildings and facilities are being built daily adding to the 
cosmopolitan and modern flavor of the city. However, while in the 
process of building for the future, Miami has found a piece of its 
past, the Miami Circle.
  Discovered in 1998, the Miami Circle is 38 feet in diameter and has 
been carved into the underlying bedrock. While its true purpose is 
unknown, it is thought that the circle was used to support different 
types of structures. Along with the Circle, myriad other ancient 
artifacts have been found at the site, making it a treasure trove of 
archaeological artifacts and a window into the history of the area. The 
true origin of this site has yet to be determined but it is widely 
believed it was created by the Tequesta Indians.
  This piece of Miami's heritage is also part of Florida's as well as 
the Nation's. It is believed to be the only cut-in-rock prehistoric 
structural footprint ever found in eastern North America. It is and 
will be a valuable tool in understanding America's indigenous peoples, 
their culture, and their technological prowess. In fact, a recent 
discovery of a Tequesta burial grounds not far from the Miami Circle 
has made the Miami Circle an even more significant historical site.
  For these reasons, the site of the Miami Circle needs to be 
preserved. This legislation will set the preservation process in motion 
by authorizing a feasibility study to be conducted to determine if 
Miami Circle should be preserved as part of Biscayne National Park. 
This important piece of America's heritage deserves the same protection 
that other American archaeological treasures enjoy. This study will 
help make that happen.
                                 ______
                                 
      By Mr. FITZGERALD:
  S. 1895. A bill to require investment advisers to make prominent 
public disclosures of ties with companies being analyzed by them, and 
for other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mr. FITZGERALD. Mr. President, I ask unanimous consent that the text 
of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1895

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Independent Investment 
     Advisers Act of 2002''.

     SEC. 2. FINDINGS.

       Congress finds that, in the decade preceding the date of 
     enactment of this Act--
       (1) events have raised concerns about the independence of 
     the research conducted by investment advisers, particularly 
     those who are affiliated with brokerage houses and investment 
     banking institutions; and
       (2) the number of class-action lawsuits alleging conflicts 
     of interest on the part of investment advisers has increased 
     dramatically.

     SEC. 3. ENHANCED DISCLOSURES BY INVESTMENT ADVISERS.

       The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
     seq.) is amended by inserting after section 204A the 
     following:


                 ``public disclosure of ties to issuers

       ``Sec. 204B. (a) If an investment adviser publishes any 
     analysis or report regarding a company or the securities of a 
     company, the investment adviser shall prominently disclose, 
     in plain language--
       ``(1) the amount of any fees that the investment adviser, 
     or person associated with the investment adviser, has 
     received from that company during the 3-year period preceding 
     the date of publication;
       ``(2) any merger or acquisition transaction handled by the 
     investment adviser during the 5-year period preceding the 
     date of publication that involves any debt or equity 
     instruments of that company, including transactions that are 
     concurrent with the publication;
       ``(3) any personal debt or equity holdings that the 
     investment adviser or person associated with the investment 
     adviser has in the company; and
       ``(4) the extent to which the investment adviser or person 
     associated with the investment adviser has debt or equity 
     holdings in that company.
       ``(b) In this section, the term `publication' has the 
     meaning given that term by regulation of the Commission, and 
     includes--
       ``(1) any written description of the subject company or the 
     securities of that company by the investment adviser; and
       ``(2) to the extent practicable--
       ``(A) any public appearance by the investment adviser or 
     person associated with the investment adviser, such as 
     participation in a seminar or forum regarding the subject 
     company or the securities of that company;
       ``(B) participation by the investment adviser or person 
     associated with the investment adviser in an interactive 
     electronic discussion group by the investment adviser 
     regarding the subject company or the securities of that 
     company; and
       ``(C) any radio or television interview of the investment 
     adviser or person associated with the investment adviser 
     regarding the subject company or the securities of that 
     company.''.
       (b) Commission Regulations.--Not later than 180 days after 
     the date of enactment of this Act, the Securities and 
     Exchange Commission shall issue final regulations to carry 
     out section 204B of the Investment Advisers Act of 1940, as 
     added by this section.
       (c) Effective Date.--Section 204B of the Investment 
     Advisers Act of 1940, as added by this Act, shall become 
     effective on the date of issuance of final regulations under 
     subsection (b).
                                 ______
                                 
      By Mrs. BOXER:
  S. 1896. A bill to prohibit accounting firms from providing 
management consulting services for the companies they audit and any 
other non-audit related services that could result in a potential 
conflict of interest or otherwise impair the independence of the 
auditor, and for other purposes; to the Committee on Banking, Housing, 
and Urban Affairs.
  Mrs. BOXER. Mr. President, today, I am introducing the Auditor 
Independence Act of 2002. The Act directs the Securities and Exchange 
Commission, SEC, to issue regulations prohibiting accounting firms from 
providing management consulting services for the companies they audit 
and barring accounting firms from providing any

[[Page S102]]

other non-audit related services that could result in a potential 
conflict of interest.
  Using the rule that former SEC Chairman Arthur Levitt proposed in 
2000 as a model, my legislation removes the actual conflict of interest 
as well as the perception of a conflict of interest that results when 
an auditing firm provides a client with consulting and auditing 
services.
  The scandal resulting from the relationship between Enron and Arthur 
Andersen is only one example of the overdue need for this reform. In 
November 2001, Enron disclosed that it had overstated profits by more 
than $580 million since 1997. That means that Enron lied to investors 
about its earnings and the Arthur Andersen auditors failed to expose 
that lie in 1997, 1998, 1999, and 2000. During each of those years, 
Arthur Andersen worked as both auditor and consultant to Enron.
  In 2000 alone, Enron paid Arthur Andersen $27 million for its audit 
work and paid the firm $28 million in management consulting fees. In 
auditing Enron, Arthur Andersen clearly made a series of errors. It is 
reasonable to assume that Arthur Andersen's dependence on the 
consulting fees that it charged Enron may have affected the quality of 
their audit work.
  But the problem is not limited to Arthur Andersen. In a study 
analyzing the effects of accounting firms' consulting business on the 
independence of their auditors, Stanford professor Karen Nelson an her 
colleagues provide evidence showing that the provision of non-audit 
services impairs an auditor's independence.
  The study used new data that has become available just since February 
2001, when the SEC began requiring corporations to disclose all audit 
and non-audit fees paid by a corporation to its auditor. The study 
looked at the ratio of non-audit versus audit revenues paid by a 
corporation to its auditing firm. It found that over half of the firms 
paid more for consulting services than audit services, and that over 95 
percent of firms purchase at least some non-audit services from their 
auditor.
  The study also found that corporations with the least independent 
auditors, those who paid the most in consulting fees versus audit fees, 
are more likely to just meet or beat earnings benchmarks, such as 
analysts' expectations and prior year earnings expectations, and to 
report large discretionary earnings. This suggests more ``earnings 
management'', manipulation of debt and earnings data, went on among 
companies in the sample that paid the highest proportion of management 
consulting fees to their auditors. We must remove this conflict of 
interest from the accounting business.
  Public confidence in the integrity of an accounting firm's audit will 
depend now more than ever before on whether auditors are independent 
from the companies that they audit. Auditors clearly cannot be 
independent from the companies they audit if they rely on those 
companies for lucrative consulting fees.
  I look forward to working with my colleagues in the Senate to pass 
this bill quickly as a part of our larger legislative response to the 
Enron scandal.
                                 ______
                                 
      By Mrs. CARNAHAN (for herself and Mr. Dayton):
  S. 1897. A bill to require disclosure of the sale of securities by an 
affiliate of the issuer of the securities to be made available to the 
Commission and to the public in electronic form, and for other 
purposes; to the Committee on Banking, Housing, and Urban Affairs.
  Mrs. CARNAHAN. Mr. President, America has the most vibrant and 
dynamic economy in the world. The foundation of our economy is our 
capital markets, which are robust and resilient. But the success of 
these markets depends on the free flow of accurate, reliable 
information. Our markets are the envy of the world, because of the 
confidence investors have in the private and public institutions that 
produce, verify, and analyze this information.
  The collapse of Enron, represents a dramatic failure of these 
institutions. Even sophisticated investors did not detect that Enron 
was in was in poor financial condition. We need to create greater 
transparency and an early warning system so investors can better 
protect themselves.
  One warning sign that a company may be in trouble is when its 
executives are selling large amounts of company stock, as occurred at 
Enron. I have learned, however, that information about insider sales of 
stock is not easily accessible. Under our current system, a company's 
officers are required to file a disclosure form with the Securities and 
Exchange Commission, (SEC), any time they sell securities issued by 
their company. Tens of thousands of these forms are filed annually. 
However, the vast majority of these forms are filed on paper, rather 
than electronically.
  The paper disclosure forms are not easily accessible to the public. 
People can see the disclosure forms at the Public Reference Room of the 
SEC in Washington, DC. Alternatively, people can request in writing 
that the SEC mail copies of the disclosure forms to them. Requests 
submitted in writing may take weeks to process. This is unacceptable in 
the electronic age.
  So today I am introducing legislation that requires information about 
insider sales of publicly traded companies to be filed electronically 
on the day of the sale. The Fully Informed Investor Act mandates that 
disclosure forms required by the SEC be filed electronically whenever 
officers, directors or other affiliates of the company sell shares of 
their company. The forms will be due at the SEC by the end of the day 
of the transaction. The SEC would then make the forms available to the 
public over the Internet. In addition, any company that maintains an 
internal company website would be required to post these disclosure 
forms on that website on the day of the transaction.
  This single reform would dramatically level the playing field between 
insiders and ordinary investors. Never again would company executives 
be able to quietly dump large amounts of company stock without facing 
immediate scrutiny about the financial health of their company.
  As I said, our capital markets are the envy of the world. To continue 
to be worthy of that envy, we need to constantly improve and modernize 
our system. The Fully Informed Investor Act is an important aspect of 
that modernization.

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