Grace Hinchman, FEI Senior Vice President, attended the presentation by Treasury Under Secretary Robert K. Steel on May 17, 2007 at the Council on Competitiveness, at which Steel outlined Treasury Secretary Henry M. Paulson's capital markets action plan to strengthen the capital markets.

Remarking on the formation of Treasury’s advisory committee on the audit profession referenced by Steel, Hinchman said, “I applaud the Treasury Department in its mission for this newly-created advisory committee to focus on a risk-based approach that is globally oriented to future financial markets.” She added, “FEI strongly supports Treasury’s intent to form a broad-based committee and would be pleased to support this and other aspects of Secretary Paulson’s capital markets initiative.”

As outlined in Steel's speech and in a Treasury press release and OpEd written by Paulson, former SEC Chairman Arthur Levitt Jr. and former SEC Chief Accountant Donald T. Nicolaisen were named by Paulson to lead a federal advisory committee to the Treasury Department on issues relating to the audit profession.

Treasury will also commission a study on restatements, which will be “a rigorous analysis of factors driving financial restatements, and their impact on investors and the capital markets.” The results of the study will be made available to the public.

Additionally, Treasury indicated support for complementary initiatives of the U.S. Securities and Exchange Commission (SEC), Financial Accounting Standards Board (FASB) and Public Company Accounting Oversight Board (PCAOB) to enhance financial reporting, including increasing transparency and accessibility of information to investors, reducing complexity, improving the rules implementing Sarbanes-Oxley Section 404 and permitting foreign filers to file under International Financial Reporting Standards (IFRS) or U.S. generally accepted accounting principles (GAAP) in the U.S.

These were among the first steps in Treasury's Capital Markets Action Plan announced in the press release, oped, and speech on May 17 cited above. 

Treasury Under Secretary Steel emphasized that Treasury’s risk-based approach to regulation will be based on cost-benefit, materiality, and enhanced dialogue between regulators and the regulated.

 Further details can be found at:

• FEI summary of Treasury’s Capital Markets Action Plan announced May 17, 2007 (FEI members only can download; for information on FEI membership, click here.)
• Secretary Paulson Opinion Editorial 5.17.07 (“The Key Test of Accurate Financial Reporting is Trust,” appearing in today's Financial Times) 
•  Press Release on Capital Markets Plan 5.17.07  (“Paulson Announces First Stage of Capital Markets Plan”)
• Under Secretary Steel Remarks on Paulson Capital Markets Plan 5.17.07 (“Strengthening Our Capital Market Competitiveness”) 
•  Federal Reserve Board Chairman Ben Bernanke’s speech 5.15.07 (“Regulation and Financial Innovation,” referenced in Steel's remarks 5.17.07).

Prepared by Edith Orenstein, eorenstein@FinancialExecutives.org Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted above.