[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.
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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).
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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.
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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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