Statement of Administration Policy: H.R. 4313 - Financial Fraud Detection and Disclosure Act

(House)
(Wyden (D) Oregon and 2 others)

The Administration supports the prompt disclosure of illegal acts that would materially affect the financial statements of publicly-traded firms. However, the Administration opposes H.R. 4313 because:

— Existing oversight mechanisms, standards of professional conduct, and the threat of costly litigation sufficiently deter the nondisclosure of illegal acts by independent public accountants.

— It would raise the costs of audits required of publicly-traded companies.

— It could increase auditors' liability.

— It could lead unnecessarily to the filing of auditing negligence actions as Federal securities claims instead of State tort claims.

The Administration understands that a substitute may be offered that would give the bank regulatory agencies responsibilities that H.R. 4313 would give to the Securities and Exchange Commission. This change would not address the objections presented above, and the Administration would oppose any substitute that fails to do so.