Wagner Delivers Opening Remarks at Hearing to Examine the Agenda of Regulators, SROs, and Standards-Setters for Accounting, Auditing
Washington,
December 12, 2023 -
Today, the House Financial Services Subcommittee on Capital Markets, led by Chairman Ann Wagner (MO-02), is holding a hearing entitled “Examining the Agenda of Regulators, SROs, and Standards-Setters for Accounting, Auditing.”
Watch Chairman Wagner’s opening remarks here.
Read Chairman Wagner’s opening remarks as prepared for delivery:
“Thank you for joining us today to discuss our financial regulatory landscape. It’s incumbent upon this Committee to highlight the indispensable roles of the Public Company Accounting Oversight Board (PCAOB), the Financial Industry Regulatory Authority (FINRA), and the Financial Accounting Standards Board (FASB) in upholding transparency, accountability, and stability within our markets. However, recent developments have raised significant concerns, necessitating a thorough review of their approaches and impacts.
“Let’s begin with the PCAOB.
“Recently proposed amendments, notably the Noncompliance with Laws and Regulations (NOCLAR) proposal, raise red flags regarding the potential overextension of auditors’ responsibilities. As Chairman McHenry and I noted in a letter to the PCAOB we sent in August, these amendments not only divert crucial resources from the primary focus on auditing financial statements but may also compromise audit quality. And the anticipated costs associated with these changes are staggering–potentially comparable to Sarbanes-Oxley. This could lead to an alarming $18.2 billion fee increase, a burden that would ultimately fall on everyday investors.
“Moreover, the PCAOB’s new approach upends U.S. auditor independence and forces them to function as law enforcement agents.
“Turning to FINRA.
“I and many of my colleagues are concerned that FINRA has strayed far from its original purpose.
“It has devolved into an overzealous and unaccountable quasi-governmental entity that looks and acts a lot more like the SEC than the member-driven SRO that Congress originally established.
“The composition of its board, primarily consisting of individuals not directly involved in the industry, raises particular concerns around accountability. Moreover, we have questions about FINRA leadership’s supervision of its operations and activities, including its enforcement function, which market participants tell me is inflicting unnecessary and excessive costs and uncertainty on the industry.
“As an SRO, we would also expect to see increased formal engagement from FINRA on issues critical to the brokerage industry.
“These include but are not limited to: the SEC’s proposed Regulation Best Interest, a rule which FINRA has had on its books and effectively enforced for decades; the so-called predictive data analytics rule, which would strike at the heart of the brokerage industry's ability to serve its customers with basic technology; and the substantial costs and privacy concerns associated with the consolidated audit trail.
“And yet FINRA has declined to provide formal comments to the SEC on many of these key issues, showing too much deference to SEC Chair Gensler and his progressive agenda. For too long FINRA has escaped serious oversight from this Committee–under Republican leadership, those days are over.
“Finally, FASB’s recent initiatives warrant attention, particularly its approach to income tax disclosures and the inclusion of sustainability reporting in its 2023 Strategic Plan. While supporting FASB’s goal of offering valuable information to investors, we must ensure that these new projects are not influenced by activists or serve as a conduit for pushing social and political agendas into Generally Accepted Accounting Principles, or GAAP. In light of these pressing issues, it is imperative for Congress to closely scrutinize proposed changes, regulatory expansions, and their comprehensive effects on market efficiency, investor trust, and the robustness of our financial systems.
“I urge all panelists today to engage in thoughtful and collaborative discussions addressing these concerns. Congress keeps a vigilant eye on these developments, and it’s imperative that our regulatory frameworks align with market needs, bolster accountability, and stimulate growth while upholding the highest standards of integrity and transparency.”
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