SECURITIES AND jP~~EXCHANGE COMMISSION ~\~~)~

Washington, D. C. 20549 .~./iz(202) 272.-2650

Remarks to theEighth AICPA National Conference

for CPAs in IndustryApril 29, 1983

Denver, Colorado

THE SEC's ROLE IN FINANCIAL DISCLOSURE

Bevis LongstrethCommissioner

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THESEC's ROLEIN FINANCIALDISCLOSURE

Introduction

This morning I would like to discuss the SEC's role infinancial disclosure. The growing complexi ty of businesstransactions and the pressures exerted by inflation, reces-sion and increased competition are taxing the abili ty ofissuers and accountants to achieve fair disclosure. TheCommission plays a central role in developing appropriatedisclosure rules to address these challenges. Exactly whatthat role is -- and how it is performed -- is the focus ofthis speech.

Specifically, I will address two issues:

First, why does the Commission continue to support amandatory system of disclosure?

Second, what is the Commission's role in setting ac-counting standards -- the keystone to financial disclosure?

A. Why the Commission Continues to SupportA Mandatory System of Disclosure

An interesting question was unobtrusively introducedat a recent open Commission meeting. The Office of theChief Accountant and the Division of Corporation Financehad jointly proposed amendments to our Bank Holding Companydisclosure rules concerning nonperforming, high risk andforeign loans. The amendments were designed to requirebetter disclosure about a bank's loan portfolio, so thatthe investor could evaluate the important risk elements.

The Directorate of Economic and Policy Analysis sub-mitted to us a memorandumasking that the release inquirewhether the additional disclosure was already being intro-duced into the market on a voluntary basis or would likelybe introduced in the absence of the proposed amendments.

If you had been a Commissioner at this meeting, howwould you have dealt with this request? For me, it raiseda fundamental issue -- one that has come up from time to

The views expressed in this speech are my own and do notnecessarily represent those of the Commission, my fellowCommissioners or the staff.

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time over the Commission's history. That issue is whethera mandatory system of disclosure is necessary. If DEPA'squestion were included in the release, and answered in theaffirmative, should it follow that we ought not to requiredisclosure, assuming materiali ty? I thought not. If thedata was materially important to investors, I believed weought to compel disclosure. Therefore, I voted againstasking the question. So too did the other Commissionerspresent.

Why mandatory disclosure is a fundamental questionworth rehearsing. I thought it might interest you tounderstand the reasoning behind my conclusion on DEPA'sproposal.

I think the mandatory disclosure program developed andadministered by the SEC has been successful in achieving Con-gress' goals. Our current regulatory approach is supported,in large measure, by investors, issuers and securities pro-fessionals. The United States capital markets are recognizedby the financial community as the most efficient and stablein the world. Restoring public confidence in the financialmarkets -- a major aim of Congress in enacting the securi-ties laws half a century ago -- has been achieved. Indeed,the administrative technique of regulation by mandatorydisclosure has become a Congressional favorite in otherlegislative areas, including various environmental statutes,the Occupational Safety and Health Act and ERISA.

This is not to say that mandatory disclosure is uni-versally applauded. It is not.

One criticism is that disclosure by government fiatgenerates useless information. Here the assumption is thatwe in government haye no special wisdom about the kinds ofinformation investors need to know. And, in fact, we don't!

The Federal securities laws are based upon the flexibleconcept of disclosure of facts material to the investor,not the bureaucrat. But bureaucrats at the SEC do notdivine what is material in some vacuum at 450 Fifth Street.For years the Commission has sought, and today continuesto seek, the help of investors and financial intermediariesin establishing what is material to them. Thus, there isa continuous process of give and take between the SEC andthe investment community, aimed at refining and improvingthe disclosure system to give investors the data they con-sider material.

A recent example of the process was the Research Forumconvened by the SEC last November. The Forum includedfinancial analysts from investment banking firms, rating

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agencies, investment adv isors, institutional investors andrepresentatives from shareholder groups. Its purpose was toelicit comments from these groups -- who in reality are theSEC's clients -- about the usefulness of what our disclosurerules produce. In March, the SEC met with representativesof the Financial Analysts Federation to discuss similarissues.

Both gatherings resulted in valuable feedback. Theystrongly supported the need for mandatory disclosure. Theystrongly favored the goal of comparabili ty in financialdisclosure. Participants felt that the criteria for deter-mining business segments needed to be tightened to assuregreater consistency from year to year. Comparative quarterlybalance sheet information was requested. Almost all agreedthat FAS 33 inflation data was not useful. There was alsoa call for more and better pension data. I look for con-tinuing improvements in our disclosure rules as a res!Jltof discussions like these.

Another criticism of mandatory disclosure has come fromrecent economic studies of the stock market and investmentprocess. These studies conclude that data disclosed pursuantto SEC rules is a case of "too little, too late."

The "efficient market" hypothesis -- that all relevantinformation swiftly becomes known to the marketplace andreflected in stock prices -- challenges the utility of man-datory disclosure. Champions of this theory charge thatcompulsory disclosure is inefficient and unnecessary -- ineffect, that it is regulatory overkill causing a drag onthe efficient workings of the capital markets. If themarketplace has already received and digested all relevantinformation prior to its disclosure in an SEC filing, theutility of an SEC filing, the argument goes, is diminished.

In response to these economic critiques, the Commis-sion, in 1977, created an Advisory Comm ittee on CorporateDisclosure to evaluate the disclosure system. The Committeeconcluded that "[m]arket forces and self-interest cannotbe relied upon to assure a sufficient flow of timely andreliable information." I agree with this assessment. Ibelieve mandatory disclosure is important for three reasons:

1. It provides a set of neutral rulesapplicable to all;

2. it provides "discipline" for themarketplace; and

3. it inspires investor confidence.

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1. Mandatory Disclosure Provides NeutralRules Applicable to All

Our system of mandatory disclosure provides a uniformset of rules for guidance and predictability. I believethat corporations, accountants, lawyers and the financialcommunity derive enormous comfort from functioning undera single set of disclosure rules applicable to all. Thesystem gives assurance that the competition for capital isfair -- that it will take place in a neutral arena withuniform rules.

Reaction to our current reappraisal of the shareholderproposal process provides a timely illustration of the com-fort and predictability a set of rules can provide. Todate, the Commission has received over 400 responses to itsrelease, in which three alternative approaches were proposed.One would continue the SEC's current regulation with minorchanges. A second would permit a company, upon shareholderapproval and within certain parameters, to adopt its ownplan. The third alternative would eliminate most of thepresent exclusions, permitting up to a specified number ofproposals, if proper under state law, to be included.

Faced with these choices, including the opportunity to"opt out" of the SEC's current regulatory process, companiesand shareholders alike have largely supported the statusquo. In support of the present system, one company responded:"SEC regulation has to an extent introduced the elements oforder, certainty and uniformity" into the process.

Perhaps we shouldn't find this so surprising. Cor-porations can become comfortable with regulation: theycan learn to live with it and even become addicted to it.Thus, with increasing frequency in this deregulatory age,we have seen those subject to government regulation resistthe efforts of those who would remove regulatory "burdens."

Of course, regulations often have anti-competitiveeffects, limiting a competitor's ability to, for example,lower prices, expand into new areas or offer additionalservices. Fortunately, this is not the case with mandatorydisclosure. It 'prescribes no particular business conductand constrains only that which companies are unwilling toexpose to the investing public.

2. Mandatory Disclosure ProvidesDiscipline in the Marketplace

Mandatory disclosure performs a disciplinary functionin the financial markets. Absent our mandatory approach,

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much information currently available would not see the lightof day -- except, perhaps, to those influential enough tocompel disclosure. The Advisory Committee's findings wereinstructive. Analysts testified that, absent SEC require-ments, they would be seriously handicapped in securingsufficient reliable and timely information.

A recent article in Dun's Business Month entitled "TheClosed-Mouthed Companies" lends credence to this conclusion.The article stated that some companies "treat analysts whofollow them as adversaries or spies for the competition andreveal as little as they can legally get away with."

J Not surprisingly, the Advisory Committee found that"good news concerning a corporation is generally much morequickly and willingly forthcoming than bad news." Manage-ment, being human, is often reluctant to disclose informa-tion that will not be welcomed by the sheeeboLder or analyst.In today's troubled economic climate where, according to arecent New York Stock Exchange economic study "each andevery major indicator of corporate financial health is ata long-term or cyclical low," a voluntary system would beseverely strained. It becomes tempting -- too much so --for a company to slant corporate information in a mannermore favorable to it or to delay the disclosure of unflat-tering news, always in the hope that, given additional time,capital or both, its problems will be solved -- and no onewill be hurt.

The recent reaction of the bank regulators to a seriesof front-page bank problems is revealing. Historically,they have been reluctant to compel disclosure by banks ofproblem loans and the Iike. However, these problems havecontributed to a reexamination of the bank regulator'straditional preference for secrecy. In a recent article,William Isaac, Chairman of the Federal Deposit InsuranceCorporation, wrote that the FDIC is seeking ways to increasemarketplace discipline. Recognizing that the marketplacemust have information to perform its disciplinary function,the FDIC has decided for the first time to make public dataon banks' problem loans and their vulnerability to interestrate changes.

This is a significant change in bank regulatory philo-sophy. It's one I applaud.

A recent report issued by The American Assembly on"The Future of the American Financial Services Institutions"supports this approach. This repo~t, which I participatedin drafting, identified as a goal of regulation that indi-viduals have access to adequate information to make informed

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decisions among competing financial products. It recom-mended that the financial reports of banks and other finan-cial services institutions accurately reflect "their presentfinancial conditions, taking inco account yields, maturi-ties, and asset qualities, so that an assessment can bemade of the adequacy of their capital and the risk theypresent to the public." Incidentally, this sounds a lotlike present value accounting. But the point is that thistype of information, while clearly material to an investmentdecision, is not likely to be forthcoming without a rulecompelling its timely disclosure.

An important feature of our mandatory system is theserious consequences that flow from a failure to complywith the rules. Mandatory disclosure ensures a degree ofaccountability for corporations that would be lacking ina voluntary program. Without accountability -- in the formof liability to investors or SEC sanctions -- there wouldbe little pressure on corporations to do a careful job indisclosing material facts to investors and the marketplace.Again, the Advisory Committee found that the mandatorydisclosure system

with its possible penalties not onlyfor misstatements and omissions infiled material but in other corporatedisclosure as well, provides a highdegree of assurance that all infor-mation furnished by corporations,privately and publicly outsidefilings as well as in them, will beresponsible and accurate.

The system also provides the professional with in-centives to ensure full and fair disclosure of materialinformation. My years in private law practice convinceme that the disclosure rules are taken very seriously byaccountants, investment bankers, lawyers and other profes-sionals involved in the preparation of disclosure documents.

3. Mandatory Disclosure InspiresInvestor Confidence

The foundation of healthy capital markets is pub licconfidence. Fairness and honesty in the conduct of markettransactions are essential to foster public confidence.I believe mandatory disclosure is an important factor inmaintaining investor confidence by ensuring a steady streamof accurate information to all investors.

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The Advisory Committee found that a voluntary dis-closure system relying on market forces to bring forthinformation would create "unacceptable inequities" amonginvestors. In The Transformation of Wall Street, ProfessorJoel Seligman's history of the SEC, he asserts that relianceon market forces would "subvert small investors' confidencein the securities markets." I agree. In a voluntary sys-tem much information that is important would flow only tothose with the clout to obtain it.

The SEC currently has its hands full investigating andprosecuting cases involving insider trading. This is a pri-ority because such abuses strike at the heart of our notionof fairness. If we were to rely on issuer self-interest andthe clout of investors to achieve disclosure, the potentialfor abuse of material information would increase. Thiscould hardly instill confidence in market participants.

Mandatory disclosure fosters investor confidence byensuring all investors of equal access to corporate infor-mation. We do not tell people how to use this information,nor should we. Whether and how information material toinvestors is used by them is a matter of free choice. Andthe diversity of approach makes for interesting markets.Investor confidence comes from the knowledge that theinformation is equally available to all -- large and small.

B. The Commission's Role in SettingAccounting Standards1. Background

I would now like to turn to the Commission's role insetting accounting standards that govern financial dis-closure. Financial statements are the foundation of ourdisclosure system. The securities acts give the SEC au-thority to prescribe the 'form and content of all financialstatements filed with it. In exercising this authority,the Commission has tended to rely on the private sector todevelop accounting principles. In ASR No.4, released in1938, the Commission stated that, absent an articulated SECposi tion on the accounting principles in question, thosewith "substantial authoritative support" would be accepted.Those without such support would be presumed to be mis-leading or inaccurate. Since that date, the Commissionhas generally looked to the accounting profession, actingthrough the Committee on Accounting Procedures and itssuccessor, the Accounting Principles Board, to take theinitiative in standard setting.

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In 1973, the Commission formalized its views on pri-vate sector initiatives in ASR 150. This release announcedsupport for the newly created Financial Accounting StandardsBoard. The Commission acknowledged that in carrying outits statutory authority it had looked to the private sectorto establish and improve accounting principles and stan-dards. This was no abdication of responsibility. It wasa pragmatic judgment of how best to get the job done. TheCommission pointed to the availabili ty of private sectorresources, its expertise and its ability to detect emergingaccounting problems at an early stage. It also observedthat private sector standards could be applied to all com-panies whether or not publicly owned.

2. Standards Setting Today - A Joint ProcessSome are critical of the Commission's failure to as-

sert a more formal role in the accounting standards settingprocess. Professor Homer Kripke, for example, describesthe accounting area as the Commission's biggest failure.Professor Joel Seligman voiced similar concerns in hisrecent book. Professor Kripke argues that "accountingprinciples have to be set jointly by the private professionand the Commission." He describes the current process asan "une asy cooperation caused by the Commission's unwiseexclusion of itself from an avowed role in the process andthe guerilla warfare it therefore has to wage to influencethe process."

I disagree with Professor Kripke. Under the Commis-sion's current procedures, accounting principles are, infact, set jointly by the profession and the SEC. Theprocess is simply not exactly as Professor Kripke wouldfashion it. There is a productive tension between theCommission and the FASB, resulting from the Commission'soversight efforts. What to Professor Kripke is "guerillawarfare" was to former SEC Chairman Harold Williams the.prodding, guidance, and review necessary to ensure theprofession meets its challenges." The Wheat study groupon establishment of accounting principles called it a.continuing dynamic relationship."

The Commission'sflexibility. On any

approachparticular

affordsissue,

itwe

considerablecan either:

1. Accept standards of financial accountingdeveloped by the private sector, or

2. provide Commission standards or staffguidance through releases or staffaccounting bulletins, or

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3. override FASB standards by issuing aCommission rule when we disagree withits conclusions.

The first option, of course, is the most common, anddemonstrates the efficiency of looking in the first instanceto the private sector for leadership, while maintainingclose oversight of its ultimate solutions. The secondoption is used when the Commission believes the privatesector is reluctant to move or has not fully addressed allaspects of an jssue or is unable to do so within a reason-able time. The override option is exercised infrequently,but the Commission's willingness to take such a step isimportant to assure that a timely joint process of standardsetting continues to exist. The late Justice William o.Douglas, third Chairman of the Commission and forcefuladvocate of private sector regulation, made this pointwith metaphorical panache in 1937:

Government would keep the shotgun, soto speak, behind the door, loaded, welloiled, cleaned, ready for use but withthe hope it would never have to be used.

The Commission's posture with respect to its responsi-bility for accounting standards initiated by the privatesector stands in contrast to its role in the rule-makingprocess for self-regulatory organizations. Pursuant to aCongressional mandate adopted in 1975, Commission-regulatedSROs such as the stock exchanges and the NASD adopt rulesthat become effective only after being approved by theCommission. Although the rules are not technically thoseof the Commission, they become final pursuant to the normalrule-making process prescribed by the Administrative Pro-cedure Act. Some critics have urged that similar treatmentbe accorded accounting standards developed by the FASB.While this idea has some surface appeal, there are dif-ferences in the two processes that seem to justify thedifferent approach taken by the Commission.

SRO rules regulate the activities of their own members.Private sector accounting standards are developed by agroup that is independent of those for whom the rules areestablished.

SROs house, protect and promote, as well as regulate,the business of their members. The FASB and its predecessorswere established solely to develop and improve accountingprinciples. And, in fact as well as theory, that is allthey do.

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SROs have no prescribed standards of due process thatinvolve public comment on rules developed for Commissionreview and approval. In contrast, the FASB follows exten-sive due process procedures that are at least as stringentas the requirements of the APA and in many ways more so.And the Commission oversees the FASB's procedures.

Finally, the FASB and its predecessors have spokenwi th authori ty on accounting standards appl icable to bothpublic and private issuers. Having one set of standardsapplicable to all business enterprises, whether or nottouched by SEC regulation, makes sense. The Commission'sapproach to accounting standards developed by the privatesector makes this result possible.

3. SEC Oversight -- How it WorksIt is through continuous oversight of the private

sector that the Commission exerts its major influence onthe principles developed by the FASB.

The Chief Accountant of the Commission, as the prin-cipal advisor to the Commission on accounting and auditingmatters, has primary responsibility for oversight. Througha constant exchange of views with the FASB, the Chief Ac-countant, and through him, the Commission, are kept currenton all significant accounting developments.

This informal process of oversight creates numerousopportunities for the Commission to affect not only theapproach to be taken by the FASB with respect to variousissues but the agenda of issues to be considered.

The Commission's accounting releases often establishstandards of accounting or disclosure for registrants. Inmany cases these releases have been followed by relatedpronouncements from the private sector, which in turn arefollowed by rescission of the Commission release.

Notable among the Commission releases that spurredprivate sector action were its rules on lease disclosure(ASR 147-0ctober 1973), disclosure of replacement cost data(ASR 190-March 1976), and the moratorium on capitalizationof interest (ASR 164-November 1974). The replacement costdisclosures, of course, precipitated the FASB's standardrequiring the disclosure of inflation-adjusted data (FAS33-September 1979). The Board also subsequently issuedstandards requiring lease capitalization (FAS 13-November1976) and providing for limited circumstances in whichinterest could be capitalized (FAS 34-0ctober 1979).

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More recently, our staff's insistence that a majorregistrant accrue a liability for unpaid vacation pay in itsfinancial statements included in a Securi ties Act filinginfluenced the FASB's decision to subsequently issue FASNo. 43 "Compensated Absences" in 1980. This standard re-quires the accrual of any unpaid vacation payor sick payat the end of a period. Our staff issued an accountingbulletin to announce its position. That SAB was rescindedwhen FAS 43 was issued.

Another example of Commission influence was its recentdecision to propose a moratorium on internal software costcap italization. This action has already accelerated theefforts of an AICPA task force addressing the issue. Themoratorium was proposed because accounting guidance todayis inadequate, creating incomparability among financialstatements and confusion among the investing public. Itwould freeze current practice until adequate rules aredeveloped.

Although such action has been rare, the Commission hasnot hesitated to override private sector initiatives whenit was found necessary. In Accounting Principles BoardOpinion No.2, issued in 1962, the APB concluded that invest-ment tax credit benefits should be reflected in income overthe life of the acquired property (the deferred method) andnot in the year the property was placed in service (the flow-thru method). After careful study, the Commission decidedin January 1963 to accept either the flow-thru method orthe deferred method prescribed by the APB.

In December 1977, after studying the two bas ic his-torical cost accounting methods for the oil and gas industry(full cost and successful efforts methods), the FASB issuedStatement 19 mandating successful efforts. The SEC decidedthat neither method adequately considered the valuation ofoil and gas reserves, which is the critical variable inassessing the economic success of an oil and gas producingcompany. Accordingly, the Commission instituted an experi-mental project to develop an accounting method based onthe valuation of proved oil and gas reserves. In the interimperiod, the Commission required certain value-based disclo-sures as supplemental information. The Commission statedin ASR 253 (August 1978) that companies could continueto use either the full cost or successful efforts method.The cost of requiring a change to one of them could not bejustified, in the Commission's view, since neither wasconsidered adequate. It also established uniform standardsfor applying the full cost method. The fact that the SECwas not ultimately successful in its quest for a new methodof value based reporting does not negate the fact that itacted when it felt action was required.

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The Board's project on how to account for receivables"sold" with recourse offers a very current example of howthe joint process works. The Board has proposed that,since the receivables are no longer assets of the seller,in that the benefits are now controlled by the buyer, theyshould be replaced on the seller's balance sheet with thecash paid for them, without any recorded liability attribut-able to the recourse feature. Our staff is inclined tobelieve there is no substantive difference between receiv-ables "sold" and those pledged against borrowing. Informaldiscussions are continuing, with our staff attempting tounderstand the rationale which supports the Board's proposal.There is a productive tension here. But it is importantto understand that the Commission does not insist that theBoard adopt exactly the same standard that the Commissionwould if it were directly dealing with the issue. In thefinal analysis, the question will be, does the Board'ssolution fall within a range of solutions acceptable tothe Commission.

The Commission's oversight efforts involve an addi-tional feature worth mentioning • Effective overs ight re-quires a credible enforcement presence. The Commissionmust be willing to compel issuers and accountants to complywith Commission rules and private sector standards.

Although questions have been raised by some, recentCommission actions evidence its continuing resolve to ensurefull and fair disclosure to investors. For example, Bankof America revised downward its earlier reported operatingearnings for the fourth quarter after the SEC staff indicatedthat a $30.8 million tax-free gain from a swap of equityfor debt should be counted as extraordinary income ratherthan part of operating income. After we objected, AetnaLife & Casualty recently stopped its practice of reportingfuture tax benefits as current earnings. And, after theSEC staff challenged Alexander & Alexander's accounting forits acquisition of a British insurer, A&A charged off $40million in acquisition costs immediately instead of reportingthem as an intangible asset to be expensed over 40 years.

Nor has the Commission ignored the accounting profes-sion. A Fall 1982 Wall Street Journal article headlined"SEC Goes Easier on Accountants" suggested that the Commis-sion was displaying a less aggressive regulatory stancewith respect to accounting firms -- not "riding herd" tooclosely. These conclusions appear to be based, in part,on perceptions that the Commission's toughness towardsaccountants can be fairly measured by the level of enforce-ment division cases publicly announced against accountants.

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All of this is nonsense! The statistics were not takenover a long enough period to be meaningful. Moreover, as isso often the case, statistics fail to tell the whole story.Lengthy incubation periods are often required to evaluateapparent audit failures. In addition, there is an ebb andflow to accounting failures that tends to follow the ebband flow of the Nation's economy. Subsequent to the WallStreet Journal article, the Commission has concluded severalactions against independent accountants. Moreover, indica-tions are that the level of such actions may significantlyincrease in the curren~ year.

4. Some Comments on the FutureIn the 1970s, there was a need for the Commission to

be highly visible and active in prodding the private sectorto act or in acting itself. The FASB was in its formativestages, the profession was under siege in the wake of highlypublicized bankruptcies and corporate scandals (Penn Cen-tral, Equity Funding, Four Seasons Nursing Homes), andCongress was exerting considerable pressure on the profes-sion and the Commission through its Congressional oversightcommittees. Today, the FASB enters its second decade ofexistence in a different environment. Many see the Boardas a mature standard setting body with strong ties to boththe SEC and the community it serves.

For the FASB to remain effective, and for the Commis-sion to maintain its posture of reliance, the Board mustpreserve and enhance its credibility. That credibilitymay be impaired by the Board's apparent inability to com-plete the major phases of the conceptual framework, aproject that has consumed, major resources of its staffsince 1973~ Remarkably, the Board has yet to make a singlehard decision. This project is too important in termsof dedicated resources and expected benefits to be allowedto languish further. In particular, resolution of therecognition and measurement issues would be highly bene-ficial to the development of future accounting standards.

Now, a few concluding thoughts. In carrying out itsstatutory responsibility to ensure full and fair disclosure,the SEC has attempted to strike a balance between estab-lishing accounting standards itself and leveraging itsefforts with private sector groups.

I am satisfied that on balance the decision to placereliance on the private sector has not been improper, andthat the system is reasonably effective. However, it can

/./

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be made to work better. One positive step to increase theCommission' s effectiveness would be for the President toappoint a distinguished independent accountant to the Com-mission when my term ends next year or thereafter whenanother opening occurs.

There has been much written and said about the need toget good CPAs more involved in the workings of our government.The appointment of Roscoe Egger as Commissioner of the IRSand Chuck Bowsher as head of the GAO indicate that someprogress is being made here. Accounting is the keystone tofinancial disclosure and thus central to the work of theCommission. Ours is a logical agency in which to continuethe trend.

I am surprised that on only one occasion in fifty yearshas an accountant been selected as a Commissioner of theSecurities and Exchange Commission. That Commissioner wasJim Needham, who served from 1969 to 1972. Given the in-creasing complexity of accounting issues and the frequencywith which they are presented to the Commission, such anappointment would strengthen the Commission' s abili ty tomake sound decisions in this area.

It would enhance our oversight program in variousways. For example, it would serve as a link between theChief Accountant and the Commission. It would also im-prove communication between the Commission and the privatesector, because such a Commissioner would be a logicalspokesman for the Commission in accounting, auditing andfinancial. reporting matters.