Hoping to fend off a congressional attack on what could be one of his last major efforts as
Securities and Exchange Commission
this week implored key members of
not to cripple his plan to rein in the accounting industry.
Levitt made the plea as rumors circulated on Capitol Hill that several lawmakers would insert language to garrote his proposed accounting rules in next year's federal appropriation bill for the SEC. Those rules, which have been debated for months, would effectively stop accounting firms from providing consulting services to the clients they audit.
Levitt has said the prohibition is necessary to preserve the integrity of the accounting industry as it has increasingly moved toward providing other lucrative financial services. And he objected to congressional plans to stifle the initiative.
"Intervention in the commission's customary regulatory processes would set an unfortunate precedent that could undermine the SEC's ability to carry out the mission Congress entrusted it to achieve," Levitt wrote to congressional leaders. "The controversy surrounding this initiative, unfortunately, extends beyond the substance of the proposed rule and threatens to impede the independence of an agency whose fundamental mission is to protect investors."
Sen. Phil Gramm (R.,Texas) said the SEC should spend more time considering the issue. "The rule proposed by the SEC is too draconian to be implemented in its present form," Gramm said in a statement.
Levitt's maneuver came at a critical juncture for the auditing rule. The large accounting firms have stridently opposed the effort, calling it regulatory overreaching that is neither needed nor warranted. Meanwhile, time pressure is becoming acute. Congress is tentatively scheduled to recess at the end of this week. And Levitt's position as the SEC's top official will be up for grabs after next month's elections.
Levitt's term on the commission doesn't expire until 2003, but the next SEC chairman will be appointed by whoever is elected president on Nov. 7.
The auditing independence issue has been a contentious one, with recent
critical outbursts between Levitt and accounting industry officials. On Tuesday, talk circulated that some congressional leaders would use the SEC's spending bill to throttle the proposed auditing rules.
"There are efforts by some members to insert language" in that bill, one congressional staff member said. "That's obviously the impetus of this letter
SEC spokesman Chris Ullman agreed. "We have heard from credible sources that some sort of rider that would affect our ability to carry out the rule ... is being tossed around," Ullman said.
Ullman said there's no set time frame for the SEC to approve new auditing rules. He also said the SEC is working with the Big Five accounting firms to try to draft rules they can live with.
But congressional leaders feel the heat is on.
"The SEC is putting the full-court press on getting this thing done," said the congressional staffer. "This issue, in particular, will be interesting to watch."