August 20, 1998
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549-6009
Re: Proposed Amendment to Rule 102(e) of the Commissions Rules of Practice
File Reference No. S7-16-98
Dear Mr. Katz:
FPL Group, Inc. (the Company) is pleased to comment on your proposed amendment to Rule 102(e) of the Commissions Rules of Practice. The Company employs a number of professionals and obtains services from accountants in public practice who would be affected by such a proposal. The Company, an SEC registrant, is the parent company of Florida Power & Light Company, an investor-owned electric utility serving about half the population of Florida.
Rule 102(e) authorizes the Commission to censure, suspend or bar persons who practice before it for several reasons, including persons who engage in unethical or improper professional conduct. The proposed amendment seeks to further define the phrase "improper professional conduct" as it relates to accountants specifically.
We agree with the Commissions attempt to provide greater clarity and consistency regarding the application of Rule 102(e). However, the proposed amendment, which speaks specifically to when accountants engage in "improper professional conduct", appears too broad and ambiguous, and could allow the Commission the ability to sanction professionals for good faith differences of opinion about what professional standards require, or for inadvertent errors or occasional negligent mistakes in the application of professional standards. We believe the focus of the proposed amendment should be on the underlying purpose of this rule which is to protect the integrity of the Commissions processes, rather than engage in substantive regulation of accounting.
Areas of concern regarding the proposed amendment include the following:
The amendment as proposed expressly incorporates the Commissions reliance on a negligence standard and it contemplates that an accountant may be disciplined for even a single violation that presents a substantial risk. We do not believe that mere misjudgments or negligence necessarily establishes either professional incompetence warranting Commission disciplinary action or the likelihood of future danger to the Commissions processes. While a harmless judgment error or immaterial mistake should not trigger a violation proceeding, reckless and specific negligent misconduct may require Commission action to protect the integrity of the Commissions processes and the interests of the investing public.
The nature of accountants work, like other professionals subject to Rule 102(e), is to make judgement calls after considering many complex statutory and regulatory requirements, as well as applying established accounting and auditing standards. These determinations demand the application of independent professional judgment and involve matters of fact at a point in time, without the benefit of hindsight. Also, the professions are regulated according to rigorous ethical rules enforced by professional societies and state licensing boards. Matters of concern regarding ethical and professional responsibility are more properly dealt with by professional organizations. The Commissions role is better served by disciplining those unscrupulous or incompetent practitioners that harm the integrity of its processes.
The relationship between accountants and both their employer and their independent accountants could be impaired in an environment that restricts accountants in the free exercise of their judgment. Accountants should have every incentive to exercise their objective professional judgment and advise their clients without fear that doing so will subject them to inappropriate sanctions based upon second guessing and overly broad, vague standards.
We thank you for the opportunity to comment on the proposed amendment. Your consideration of our comments is appreciated.
Chief Accounting Officer