[Federal Register Volume 65, Number 151 (Friday, August 4, 2000)]
[Notices]
[Pages 48032-48033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-19735]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43090; File No. SR-Amex-00-04]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the American Stock Exchange LLC Adopting a Peer Review 
Requirement for Auditors of Listed Companies

July 28, 2000.

I. Introduction

    On February 14, 2000, the American Stock Exchange LLC (``Exchange'' 
or ``Amex''), submitted to the Securities and exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change amending the Amex Company Guide to adopt a peer 
review requirement for auditors of listed companies. The proposed rule 
change was published for comment in the Federal Register on May 26, 
2000.\3\ The Commission received one comment letter in favor of the 
proposal.\4\ This order approves the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 42803 (May 22, 2000), 65 
FR 34236.
    \4\ Letter from Ronald Walton, Chair, American Institute of 
Certified Public Accountants (``AICPA'') SEC Practice Section Peer 
Review Committee, to Jonathan G. Katz, Office of the Secretary, 
Commission, dated June 16, 2000. This commenter supported the 
proposed rule change.
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II. Description of the Proposal

    The Exchange proposes to amend the Amex Company Guide to require 
all independent public accountants auditing Exchange listed companies 
to have received an internal quality control review by an independent 
public accountant (``peer review''), or be enrolled in a peer review 
program that meets acceptable guidelines.\5\ According to the Exchange, 
acceptable guidelines would include comparability to AICPA standards 
included in the Standards for Performing on Peer Reviews, as codified 
in the AICPA's SEC Practice Section Reference Manual, and oversight of 
the peer review program by an independent body comparable to the 
organizational structure of the Public Oversight Board, as codified in 
the AICPA's SEC Practice Section Reference Manual. Further, the 
proposal would require copies of peer review reports, accompanied by 
any letters of comment and letters of

[[Page 48033]]

response, to be maintained by the administering entity of the peer 
review program and be made available to the Exchange upon request.\6\ 
Similarly, working papers of the administering entity and the 
independent oversight body would also be required to be retained for 90 
days after the report is filed, and be made available to the Exchange 
upon request.
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    \5\ The Exchange has noted that the Nasdaq Stock Market and 
certain banking agencies, such as the Federal Deposit Insurance 
Corporation, have implemented a peer review requirement.
    \6\ The administering entity would be required to maintain the 
reports until the completion of the next peer review report. 
Telephone call between Sonia Patton, Attorney, Commission, and John 
Nachmann, Attorney, Office of the General Counsel, The Nasdaq-Amex 
Market Group, on March 28, 2000.
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    In addition, the Exchange believes that auditors of listed 
companies should be subject to a practice monitoring program under 
which the auditor's quality control system is reviewed by an 
independent peer auditor on a periodic basis. Consequently, after the 
initial peer review required by proposed Section 605(a) of the Amex 
Company Guide, independent auditors of listed companies would be 
required to receive a peer review that meets the guidelines of proposed 
Section 605(b) every three years pursuant to AICPA guidelines.\7\
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    \7\ Telephone call between Sonia Patton, Attorney, Commission, 
and John Nachmann, Attorney, Office of the General Counsel, The 
Nasdaq-Amex Market Group, on March 28, 2000.
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of Section 6(b)(5) of the Act \8\ and the rules 
and regulations thereunder applicable to a national securities 
exchange, in that it is designed to facilitate securities transactions 
and to remove impediments to and perfect the mechanism of a free and 
open market.\9\ The Commission believes that the proposed rule change 
will protect investors by improving the reliability and effectiveness 
of audit committees of companies listed on the Exchange and by helping 
to ensure that an auditing firm's quality control systems are subject 
to a level of review that satisfies standards established by the 
accounting industry. In addition, the Commission believes that by 
requiring auditors to receive a peer review on a periodic basis, the 
proposal will help to ensure that auditors will continue to have 
quality control systems in place and follow independently established 
policies, procedures, and auditing standards. Finally, by requiring the 
administering entity and the independent oversight body of the peer 
review program to retain peer review records and to allow the Exchange 
access to these records, the Commission believes that the proposed rule 
change will help enable the Exchange to enforce the peer review 
requirement.
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    \8\ 15 U.S.C. 78f(b)(5).
    \9\ In approving this rule change, the Commission has considered 
the proposal's impact on efficiency, competition, and capital 
formation, consistent with Section 3 of the Act. 15 U.S.C. 78c(f).
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IV. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Amex-00-04) is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-19735 Filed 8-3-00; 8:45 am]
BILLING CODE 8010-01-M