Document ID: SEC-2011-1268-0001
Agency: sec
Document Type: Notice
Title: Order Approving Proposed Temporary Rule for Interim Program of Inspection Related to Audits of Brokers and Dealers: Public Company Accounting Oversight Board
Posted Date: 2011-08-24T04:00Z

[Federal Register Volume 76, Number 164 (Wednesday, August 24, 2011)]
[Notices]
[Pages 52996-52997]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-21600]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65163; File No. PCAOB-2011-01]

Public Company Accounting Oversight Board; Order Approving 
Proposed Temporary Rule for an Interim Program of Inspection Related to 
Audits of Brokers and Dealers

August 18, 2011.

I. Introduction

    On June 21, 2011, the Public Company Accounting Oversight Board 
(the ``Board'' or the ``PCAOB'') filed with the Securities and Exchange 
Commission (the ``Commission''), pursuant to Section 107(b) \1\ of the 
Sarbanes-Oxley Act of 2002 (the ``Sarbanes-Oxley Act'') and Section 
19(b)(1) \2\ of the Securities Exchange Act of 1934 (the ``Exchange 
Act''), a proposed rule change (PCAOB-2011-01) to establish an interim 
inspection program related to audits of brokers and dealers. The 
proposed Rule 4020T amends Section 4 of the Board's rules. The Board 
also adopted amendments to Section 1 of its rules to add notes 
following Rules 1001(a)(v), 1001(a)(vi), and 1001(p)(vi). The proposed 
rule change was published for comment in the Federal Register on July 
12, 2011.\3\ The Commission received one comment letter on the proposed 
rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 7217(b).
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ Release No. 34-64814 (Jul. 6, 2011) [76 FR 40961 (Jul. 12, 
2011)].
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II. Discussion

    Section 982 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act \4\ amended the Sarbanes-Oxley Act to give the Board 
explicit oversight authority with respect to audits of brokers and 
dealers that are registered with the Commission.\5\ Among other things, 
the Board is authorized to

[[Page 52997]]

establish an inspection program by rule.\6\ Section 104(a)(2) of the 
Sarbanes-Oxley Act provides that, in establishing such a program:
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    \4\ Public Law 111-203, 124 Stat. 1376 (Jul. 21, 2010).
    \5\ For information regarding the audit of brokers' and dealers' 
financial statements and examination of reports regarding compliance 
with Commission requirements, see generally Rule 17a-5 under the 
Exchange Act (17 CFR 240.17a-5) and related SEC rules and forms.
    \6\ Section 104(a)(2)(A) of the Sarbanes-Oxley Act.
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     The Board may allow for differentiation among classes of 
brokers and dealers;
     The Board shall consider whether differing inspection 
schedules would be appropriate with respect to auditors that issue 
audit reports only for brokers or dealers that do not receive, handle, 
or hold customer securities or cash or are not members of the 
Securities Investor Protection Corporation; and
     If the Board exempts any public accounting firm from such 
an inspection program, the auditor would not be required to register 
with the Board.
    The Board has filed a proposed rule change to establish a temporary 
rule for an interim program of inspection that would allow the Board to 
begin inspections of relevant audits and auditors and provide a source 
of information to help guide decisions about the scope and elements of 
a permanent program. The Board explained that it intended to take a 
careful and informed approach in establishing a permanent program that 
appropriately protects the public interest and the interests of 
investors, including consideration of potential costs and regulatory 
burdens that would be imposed on different categories of registered 
public accounting firms and classes of brokers and dealers.\7\ The 
Board also explained that it did not intend to make the necessary 
judgments without first gathering and assessing relevant information, 
but that it did not intend to postpone all use of its new inspection 
authority until after those judgments were made.\8\
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    \7\ See PCAOB Release No. 2011-01 (Jun. 14, 2011), at 3.
    \8\ See id.
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    The temporary rule provides that the Board will publish a report on 
the interim program no less frequently than every twelve months, 
beginning twelve months after the date the rule takes effect and 
continuing until rules for a permanent program take effect. Each report 
will describe the progress of the interim program and any significant 
observations that either may bear on the Board's consideration of a 
permanent program or the publication of which may otherwise be 
appropriate to protect the interests of investors or to further the 
public interest.

III. Discussion of Comments

    The Commission received one comment letter on the proposed rule 
change.\9\ The commenter, a small registered accounting firm that 
performs audits of broker-dealers but not issuers, expressed strong 
support for the inclusive scope of the temporary rule and also for the 
establishment of a permanent program of inspection that would include 
all auditors of broker-dealers.\10\ The commenter supported a program 
that would not differentiate among types of brokers and dealers or 
exempt certain public accounting firms, noting their view that any such 
limitations would not be ``fully protecting the public interest and 
interest of investors.'' \11\
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    \9\ See letter from Farkouh Furman & Faccio LLP.
    \10\ See id.
    \11\ Id.
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IV. Conclusion

    After careful review of the proposed rule change, the Commission 
finds that the proposed rule change is consistent with the requirements 
of the Sarbanes-Oxley Act and the securities laws and is necessary or 
appropriate in the public interest or for the protection of investors.
    It is therefore ordered, pursuant to Section 107 of the Sarbanes-
Oxley Act and Section 19(b)(2) of the Exchange Act, that the proposed 
rule change (File No. PCAOB-2011-01) be and hereby is approved.

    For the Commission, by the Office of the Chief Accountant, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-11(b)(2).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21600 Filed 8-23-11; 8:45 am]
BILLING CODE 8011-01-P