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SEC Proposes New Standards for Boards

January 09, 2003|From Associated Press

Companies would be forced to meet new standards for director watchdogs ordered by Congress in response to last year's accounting scandals, under a proposal that federal regulators adopted Wednesday.

The proposed rule, issued for public review by the Securities and Exchange Commission, would bar companies from trading on U.S. stock exchanges if they failed to meet the standards for audit committees of boards of directors.

Directors who sit on a company's audit committee, for example, must come from outside the company under the law enacted last summer. The law was designed to bolster shaken public confidence in the integrity of corporate America.

"This is a critically important way to restore investor confidence," SEC Commissioner Harvey Goldschmid said. The rule would take effect in April 2004.

In a related move, the U.S. Sentencing Commission adopted tougher penalties for corporate crimes but declined to stiffen penalties for broader categories of fraud as the Justice Department had requested.

The new sentences, which will be used by judges beginning later this month, will affect company executives convicted of securities law violations or other crimes, people who shred documents or block investigations, and those involved in large-scale frauds. Sentences for some crimes will double.

The SEC commissioners also voted in closed session to appoint Charles Niemeier as temporary chairman of the new Public Company Accounting Oversight Board. Before he was named to the board in October, Niemeier was the chief accountant for the SEC's enforcement division.

In addition, the SEC said it would vote next week on rules to expand companies' earnings disclosures and restrict executive stock trades when employees can't sell 401(k) plan shares.

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