U.S. Will Pay for Regulatory Isolationism, Ex-SEC Chiefs Say

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By Steve Burkholder

Former top U.S. securities and auditing regulators cautioned against the U.S. pulling out from global groups and forums on banking, securities and accounting that help ensure smooth working of global markets.

The former officials warned that losing a voice at such international meetings could harm the competitive stance of U.S. companies and continued national economic success.

“I worry very much about our withdrawal as a country from international organizations that are responsible for making sure that capital markets can work effectively without borders,” Mary Schapiro—former Securities and Exchange Commission chair from 2009 through 2012—said Jan. 30.

U.S. Should Participate

Schapiro cited the importance of U.S. participation on “international accounting organizations” including:

  •  the Financial Stability Board, an international organization that monitors and recommends changes to global financial systems;
  •  the Basel Committee on Banking Supervision;
  •  the International Organization of Securities Commissions; and
  •  international accounting organizations.
Those groups are “really critical” to the smooth functioning of the market and of banks that have to cross borders, said Schapiro.

Harvey Pitt, SEC chairman from 2001 and 2003; Mark Olson, former head of the Public Company Accounting Oversight Board; and Daniel Goelzer, former acting chairman of the PCAOB, all generally agreed with Schapiro’s assessment Those three and Schapiro spoke on a panel, moderated by PCAOB Chairman James Doty, at a Washington symposium to mark the 10th anniversary of the Center for Audit Quality, an affiliate of the American Institute of CPAs.

Withdrawal’s Cost: Big ‘Leadership Gap.’

Schapiro described a high cost of the U.S. retreating from tasks of regulatory cooperation.

“If we withdraw from the stage, there will be an enormous leadership gap. Somebody else will fill it ultimately,” Schapiro said. “And we will lose our voice in things that really, really matter to the success of our economy over the long run.”

To illustrate her point, Schapiro cited “a lot of rhetoric we’re hearing recently” and a “nervousness” around the world that the U.S. might scale back participation in “multilateral organizations where a lot of the hard, gritty work of getting a coordinated approach to regulation happens.”

Out-of-Sync Rules’ Harm U.S. Companies: Pitt

Pitt also stressed the need for U.S. and international accounting standard-setters to stay involved in the writing of global financial reporting rules—or at least to minimize differences in U.S. and international standards.

If companies primarily based in the U.S. are subject to one set of standards, “but their competitors are subject to very different standards, that is going to hurt U.S. trade,” Pitt said. “That is going to hurt the U.S.'s ability to compete in a global workplace.”

“No country gives up its sovereignty on regulation or supervision. That’s why the requirement of working together is increasingly important,” Olson said.

Edward Nusbaum, chief executive officer of accounting firm Grant Thornton, told Bloomberg BNA that the International Forum of Independent Audit Regulators is another group with which U.S. regulators should continue to be engaged. The PCAOB helps lead the forum and should keep doing that, even as the board evolves, Nusbaum told Bloomberg BNA.

He described “changes in the political environment” in the U.S, the U.K, with Brexit, and throughout Europe. “The game is changing,” said Nusbaum. “But that’s okay, as long as we rethink, as a business and as an accounting profession, how we deal with those changes.”

“It doesn’t mean that U.S. businesses should retreat and only do business in the U.S.” he told Bloomberg BNA.

To contact the reporter on this story: Steve Burkholder, reporting from Washington, at sburkholder@bna.com

To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bna.com

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