Summits Address Capital Market Concerns




The AICPA participated in two meetings on the competitiveness of U.S. capital markets in Washington in March. The first, hosted by Treasury Secretary Henry M. Paulson on March 13, included an open discussion among 45 of the nation’s top business and association executives on whether the U.S. capital markets have struck the right balance between investor protection and market competitiveness. The discussion focused on the U.S. regulatory structure, the accounting profession and the legal and corporate governance environment.

During the meeting, AICPA President and CEO Barry Melancon was invited to take part in a closed-door brainstorming session on issues affecting U.S. market competitiveness in areas such as corporate governance, regulations affecting registrants, investor rights, and accounting and auditing matters.

The next day, Melancon participated in the U.S. Chamber of Commerce’s First Annual Capital Markets Summit. The chamber shared the results and recommendations from an ongoing study and analysis of U.S. capital markets that began in 2006 and focused on identifying the legal and regulatory obstacles to competitiveness. At the meeting, Melancon and others shared their reactions to the chamber’s report.

The following are Melancon’s observations on the two summits:

“The competitiveness of the U.S. capital markets has moved from something that was being talked about quietly to an issue that is front and center. Secretary Paulson’s working group of business and organizational leaders and investor representatives consisted of an open dialogue about the future and what could be done, both in the short and long term. It was a privilege to represent the profession at these events with the likes of Federal Reserve Chairman Ben Bernanke, Secretary Paulson, Warren Buffett, Charles Schwab, New York Mayor Michael Bloomberg, Alan Greenspan and others. These venues provided me with the opportunity to make points about the importance of the audit process and to highlight areas where improvement can be targeted.

“The overall theme of the Paulson and U.S. Chamber summits, I believe, can be summed up in the word ‘balance.’ The U.S. capital markets remain the leaders, but foreign capital is more readily available and foreign markets are marketing against some of the issues in the U.S., including regulatory approach, litigation and regulatory requirements.

“At both summits, participants recognized the need for investor protection and acknowledged it as one of the things that makes the cost of capital in the United States less than in other parts of the world. However, the gap has been closed recently, and a regulatory and legal approach that uses balance is critical to long-term success. The focus of balance centers on the use of professional good faith judgment and the recognition of that judgment in the regulatory process.

“Another major theme at these meetings was what is termed the ‘sustainability of the auditing process.’ This focus was on the threats to the Big Four and the ability of next-tier firms to serve larger public companies. Environmental changes, including more balance in the regulation of the profession and the use of materiality in some matters, were discussed as important in the largest firm segment. In the next tier, barriers to setting up and expanding global networks or associations and market acceptance are important factors in creating a better environment for these firms to grow to be able to serve larger public clients.”


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