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SEC Approves Rule Targeting Audit Conflicts

November 16, 2000|From Bloomberg News

The Securities and Exchange Commission on Wednesday approved a rule aimed at preventing conflicts of interest at accounting firms that consult for companies they audit. It also adopted measures to help investors get the best possible trading prices on securities.

The new auditor-independence standard will require corporate audit committees to more closely review auditing and consulting contracts, with fuller disclosure of these payments.

The measure, which takes effect in two months, also will prohibit accounting firms from both managing a company's computers and auditing its financial statements. This provision was a softening of the SEC's original proposal, which would have barred accounting firms from doing any computer consulting for audit clients.

Other market-regulation rules adopted Wednesday will require brokerages to release composite data on where they send customer stock orders and how well these orders are filled. Another measure seeks to ensure that, once U.S. options markets are electronically linked, investors who order exchange-listed options get the best available price.

The SEC's new order-routing rule, which is to be phased in starting in April, requires brokers to post quarterly reports on the Internet about the percentage of orders they route to various places for execution. It also calls for firms to release monthly reports of their order-execution quality.

In addition, firms would have to disclose whether they "internalize" orders by filling them from their own inventory or sell them to other firms.

The new SEC options rules will require a dealer to tell a customer when his order for an exchange-traded option is executed at a price inferior to the best available quote.

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