Subject: File No. S7-20-96
Date:  9/28/96 12:02 PM

I have been a member of the boards of directors of several
companies whose securities are publicly held and chairman of the
audit committees of those companies.

The proposed rule would be welcome in an area of deep concern to
many board members. However, I do not believe that the proposed
different reporting requirement (to the board) based on whether or
not the illegal act is "material" is warranted. 

The idea of "materiality" in accounting and auditing remains one of
the worst developed areas. Definitions are particularly poor with
respect to illegal acts. The potential for conflict between a board
and management over illegal acts is significant.

Auditors should be required to notify the board of directors or
ascertain that notification was made, "as soon as practible" with
respect to all illegal acts discovered. The board, not only the
auditor, should make a judgement as to the materiality of illegal
acts. The auditor may make his own judgement and be required to act
on it. 

While I agree with the proposed rule (modified as I have
suggested), it is another example of the Commission's placing more
responsibilities on boards, without assuring that the board,
particularly the independent members of the board, has the
necessary effective power to fulfill the responsibilities. I urge
the Commission to examine the role, responsibilities and powers of
independent directors with a view towards improving the power to
match the apparent responsibilities. 

Lee J. Seidler