[Federal Register Volume 69, Number 40 (Monday, March 1, 2004)]
[Notices]
[Pages 9654-9655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4435]



[[Page 9654]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49302; File No. SR-Amex-2003-86]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the American Stock Exchange LLC 
To Amend Section 605 of the Exchange's Company Guide Relating to the 
Requirements Applicable to Listed Company Auditors

February 23, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 3, 2003, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
items I, II and III below, which items have been prepared by the 
Exchange. On January 22, 2004, the Exchange submitted an amendment to 
the proposed rule change.\3\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Eric Van Allen, Assistant General Counsel, 
Amex, to Nancy Sanow, Assistant Director, Division of Market 
Regulation, Commission, dated January 21, 2004, replacing Form 19b-4 
in its entirety (``Amendment No. 1''). In Amendment No. 1, the Amex 
made technical changes to its proposed rule text and discussion.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend section 605 of the Amex Company 
Guide with respect to the requirements applicable to listed company 
auditors. The text of the proposed rule change, as amended, is set 
forth below. Text in brackets indicates material to be deleted, and 
text in italics indicates material to be added.
* * * * *

American Stock Exchange LLC Company Guide

Sec. 605 [Peer Review] Auditor Requirements

    [(a) A listed company must be audited by an independent public 
accountant that:
    (i) has received an external quality control review by an 
independent public accountant (``peer review'') that determines whether 
the auditor's system of quality control is in place and operating 
effectively and whether established policies and procedures and 
applicable auditing standards are being followed; or
    (ii) is enrolled in a peer review program and within 18 months 
receives a peer review that meets acceptable guidelines.
    (b) The following guidelines are acceptable for the purposes of 
Sec. 605:
    (i) the peer review should be comparable to AICPA standards 
included in Standards for Performing on Peer Reviews, codified in the 
AICPA's SEC Practice Section Reference Manual;
    (ii) the peer review program should be subject to oversight 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; and
    (iii) the administering entity and the independent oversight body 
of the peer review program must, as part of their rules of procedure, 
require the retention of the peer review working papers for 90 days 
after acceptance of the peer review report and allow the Exchange 
access to those working papers.]
    A listed company must be audited by an independent public 
accountant that is registered, as required, with the Public Company 
Accounting Oversight Board (``PCAOB'').
    Commentary
    .01 In evaluating the eligibility of an issuer which has applied 
for listing, the Exchange will only consider financial statements 
provided in connection with the application and relied upon to 
demonstrate compliance by the applicant, if such financial statements 
were audited or reviewed, as required by applicable SEC requirements, 
by an independent public accountant that was, at the time of issuance 
of such financial statements, either registered with the PCAOB, or, for 
financial statements issued prior to the time the auditor was required 
to register with PCAOB, enrolled in the American Institute of Certified 
Public Accountants (``AICPA'') or equivalent peer review program.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, section 605 of the Amex Company Guide requires Amex 
listed companies to be audited by an independent public accountant that 
participates in a peer review program, i.e., an external quality 
control review by an independent public accountant that determines 
whether the auditor's system of quality control is in place and 
operating effectively and whether established policies and procedures 
and applicable auditing standards are being followed. In practice, 
section 605 of the Amex Company Guide requires that the auditor either 
be a member of the American Institute of Certified Public Accountants 
(``AICPA'') SEC Practice Section, which subjects the auditor to the 
AICPA peer review program, or be enrolled in a peer review program with 
comparable standards.
    Pursuant to the Sarbanes-Oxley Act of 2002 (``Sarbanes-Oxley 
Act''), the Public Company Accounting Oversight Board (``PCAOB'') was 
created to regulate accounting firms that prepare and issue audit 
reports on public companies that are either required to file reports 
with the Commission or that have filed a registration statement for a 
public offering of securities (together, ``public companies''). The 
Sarbanes-Oxley Act further provides that 180 days after the Commission 
determines that the PCAOB is capable of carrying out its 
responsibilities, accounting firms that are not registered with PCAOB 
would be prohibited from preparing or issuing audit reports on public 
companies. In accordance with recently approved PCAOB rules, U.S. 
accounting firms were required to register by October 22, 2003.\4\
---------------------------------------------------------------------------

    \4\ Pursuant to PCAOB rules, foreign public accounting firms 
have been granted an additional 180 days to register (i.e., until 
April 19, 2004).
---------------------------------------------------------------------------

    Accordingly, the Exchange proposes to revise section 605 of the 
Amex Company Guide to specify that Amex listed companies must be 
audited by an accounting firm registered, as required, with the PCAOB. 
New commentary to section 605 would also clarify that, in evaluating 
the eligibility of an issuer which has applied for listing, the 
Exchange would only consider financial statements provided in 
connection with the application and relied upon to demonstrate 
compliance by the applicant, if such financial statements

[[Page 9655]]

were audited or reviewed, as required by applicable Commission 
requirements, by an independent public accountant that was, at the time 
of issuance of such financial statements, either registered with the 
PCAOB, or, for financial statements issued prior to the time the 
auditor was required to register with PCAOB, enrolled in the AICPA or 
equivalent peer review program.
    In evaluating either the initial or continued listing eligibility 
of an issuer, the Exchange would consider the extent to which any PCAOB 
regulatory finding or action, a modified or adverse peer review 
opinion, or other regulatory issue with respect to a listed company's 
auditor raises concerns with respect to the reliability or integrity of 
the company's financial statements. As warranted, the Exchange would 
take action pursuant to its general authority to exclude issuers 
raising public interest concerns from listing (i.e., sections 101 and 
1003(f)(iii) of the Amex Company Guide) to either deny the listing 
application or delist the issuer.\5\ In determining whether a public 
interest concern exists, the Exchange would consider the substance of 
the issue(s) raised, the independent accountant's response, including 
whether corrective action was taken, as well as any follow-up review or 
action by PCAOB or AICPA.
---------------------------------------------------------------------------

    \5\ Any such action would be subject to appropriate appeal 
procedures as set forth in Part 12 of the Amex Company Guide.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \6\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \7\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609. Comments may also be submitted electronically at the 
following e-mail address: [email protected]. All comment letters 
should refer to File No. SR-Amex-2003-86. This file number should be 
included on the subject line if e-mail is used. To help the Commission 
process and review your comments more efficiently, comments should be 
sent in hard copy or by e-mail but not by both methods. Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for inspection and copying in the Commission's 
Public Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to file number SR-Amex-2003-86 and should be 
submitted by March 22, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4435 Filed 2-27-04; 8:45 am]
BILLING CODE 8010-01-P