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Speech by SEC Commissioner: Remarks Before the Financial Accounting Foundation's 2012 Annual Board of Trustees Dinner

Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Washington, D.C.

May 22, 2012


Thank you, Terri, for your warm introduction.

I would like to thank you and the FAF for inviting me to be your keynote speaker tonight. Before I go further, please let me remind you that my remarks represent my own views, and not necessarily those of the Commission, my fellow Commissioners, or members of the staff.1

Several years ago, towards the beginning of my term as SEC Commissioner, I gave a speech and talked about the Chinese proverb, "May you live in exciting times."

There is little doubt that, indeed, we all do. Now, whether you consider this a curse or a blessing, that's up to you. I'm a Pollyanna, so I'll go with blessing.

To me, some of the most exciting times I've encountered over the past (almost) four years as an SEC Commissioner have been spent working on accounting and auditing issues.

Perhaps this is because, as some of you may know, I am the daughter of a CPA, and I'm genetically predisposed to care about these issues.

Or, perhaps it is because as a staffer in the SEC's Division of Corporation Finance, I learned how critical accounting and auditing issues are to our capital markets — and how important it was for me as a non-CPA to work closely with our Division's Office of Chief Accountant in dealing with cutting-edge disclosure issues.

Today, my job, along with my fellow Commissioners, is to carefully consider accounting and auditing issues as we carry out the agency's mission of furthering investor protection, fair, orderly, and efficient markets, and capital formation.

Striking the right balance among the three prongs of our mission is no easy task - particularly when you layer on top of that mission balancing our domestic oversight responsibilities with the need for solutions to address global market risks.

Needless to say, there are numerous questions about our policy decisions — both domestic and global — that keep this SEC Commissioner awake at night.

Global Leadership and Responsibilities

Last year I agreed to serve as the Commission's representative on two, multi-lateral international bodies.

I have just completed my tour of duty as the SEC's representative to the International Organization of Securities Commissions, and I continue to serve as the Commission's voice on the Financial Stability Board.

The jet lag has been mildly helpful in resolving my on-going sleep issues, and I am truly and deeply honored to serve the Commission in the global marketplace.

As I've embraced these roles, I am reminded of just how much the landscape has changed from my first exposure to international issues in the late 80's and early 90's when I served as Corp Fin's Deputy Director.

Back then, we really only dabbled in international issues and spent most of our time focused on domestic issues.

I can tell you that this is certainly not the case today.

I recently completed a two-week intercontinental trip, where I attended an FSB Steering Committee meeting in Basel, Switzerland followed by IOSCO's Annual Meeting in Beijing, China.

At both meetings, I was struck by the many complications presented by the differences in national laws, regulatory structures, and cultures. Yet, I was inspired by the common commitment across the globe to investor protection and market integrity.

Each jurisdiction has to make its own decision as to whether to jump into the fray and help to fashion global solutions to problems that span national boundaries, or to sit back and accept the solutions fashioned by others (or, perhaps, withdraw from or even ignore the discussion and attempt to insulate its markets from global interaction).

For the record, it won't surprise you that the SEC has chosen to be an active and vocal participant in the global regulatory arena. Global markets bound by national regulation require collaboration and coordination.

Yet, another difference exists between the cross-border issues today and those of 20 years ago — the stakes involved.

I agree with the message delivered to you earlier this year by Commissioner of Internal Revenue, and my former colleague, Doug Shulman, that our competitive position in the global marketplace is "still ours to lose."

But, unlike 20 years ago, there are a large, and growing, number of markets that may present possible alternatives to those in our country.

Thus, discussion of transnational issues without the SEC's presence — while not a viable option two decades ago nor today — is a real possibility in the short term.

Maintaining the competitiveness of our markets is not, in my view, a reason to dilute standards or fail to take enforcement or regulatory action. However, it does mean that, more today than ever before, it is critical for us to build bridges among nations by enhancing cooperation among regulators. A close network of regulators provides better oversight of advanced and integrated markets that, in turn, facilitates efficiencies and growth in capital-raising, and, most important to me, investor protection and market integrity.

Through strong cross-border relationships and alliances we can enhance our competitive position. And, this is the only way forward if we wish to protect our markets from the threats presented by illegal or ill-advised conduct that may take place as easily outside as inside our borders.

Market misconduct and financial contagion simply do not respect national boundaries. Cooperation and closer ties among market regulators and standard setters offer a degree of protection against cross-border risks to our financial system. Given the interconnections among markets, a threat to our counterpart's market is likely very much a threat to our own.

But, while I remain quite optimistic about the work the SEC is doing to support open, interconnected, and efficient markets of high integrity, I know that at the end of the day we are responsible for administration and enforcement of our own laws.

So, let me be clear in saying that, as we continue to engage with regulators around the globe, the Commission will continue to take actions that are in the best interests of U.S. investors consistent with our mission.

Global Accounting Standards

Of course, in Basel, as well as in Beijing, my fellow regulators pressed me for the answer to the question that's probably on all of your minds this evening — what is the SEC going to do about IFRS?

The staff expects to publish its final report under the Work Plan in a matter of weeks. Once we have time to evaluate the contents of the final staff report, my fellow Commissioners and I will consider the next steps.

Our Chief Accountant and his staff, aided by others throughout the agency, have worked tirelessly executing this Work Plan. Their efforts are truly to be commended, and I am grateful for their infinite patience with those of us who are not CPAs.

The staff's reports and papers published over the past two-plus years have resulted in precisely the kind of data and analysis we need to help us evaluate the issues concerning further incorporation of IFRS into the U.S. capital markets.

Now, I recognize that this may not be the definitive answer that you or my fellow regulators abroad probably wanted to hear, but it's really the only answer that I can give at this time.

However, my personal view is that perhaps we should be answering a different question.

Everyone is asking whether, and when, the U.S. will incorporate IFRS. We should also be asking how the U.S. should continue its participation in the development of global accounting standards.

On that front, my view is that any decision to incorporate IFRS should include the FASB determining to endorse newly issued IFRS standards following a robust due process by the IASB that appropriately considers the U.S. perspective.

The FASB is best positioned to represent the U.S. interest in the IASB standard setting process and, thus, I believe it is critical for the FASB to play a substantial role throughout that process.

In addition, while most people are focusing on the staff's efforts under the Work Plan, I believe it is important to remember another aspect of this decision that was highlighted in the Commission's statement from February 2010. It is critical that the FASB and the IASB continue to make satisfactory progress on the major convergence projects.

I continue to believe that high-quality, converged standards are vitally important to serving the best interests of investors in the increasingly global capital markets.

And, last but not least, a robust IFRS interpretive process and rigorous, coordinated application and enforcement of IFRS, will continue to be essential to make sure that investors receive the high quality information they need.

Investor Confidence

While it is critical that regulators and standard setters continue to engage in our own, on-going dialogues, I believe that we must also take the time necessary to listen to investors and take actions that will enhance transparency.

Enhanced transparency allows investors to make better informed investment decisions.

Accountants, auditors, standard setters, and regulators each play a key role in improving transparency for investors.

Yet, I continue to believe that investors "expect more" from all of us — as our Chairman stated in her remarks to you at last year's annual dinner.

I am quite optimistic that our Office of Chief Accountant's "Financial Reporting Series" launched last fall can play an important role in helping all of us in understanding, and striving to meet, investor expectations.

I am quite pleased to see that these roundtables include the FASB and the PCAOB as observers. Through this series of roundtables, I believe that we can better identify potential improvements to the reliability and usefulness of financial reporting. As we saw in the financial crisis, a stovepipe mentality that silos off various components in a market can lead to disaster.

Today, as we focus on enhanced coordination among regulators based in different countries, we should not lose sight of the continuing importance of coordination among the standard setters and regulators within the U.S. - particularly in situations where the work of each regulator serves to foster high-quality financial reporting. I believe that we all should be working more closely together.

For example, during the most recent financial crisis, investors, preparers, and auditors raised concerns about the application of fair value accounting and the quality of financial reporting. The Commission staff, the FASB, and the PCAOB worked cooperatively together to provide the necessary guidance to alleviate concerns and support high-quality financial reporting.

Investors are relying on us to help them get the information they need. So, let's help each other and by doing so, help them.


Before I conclude my remarks this evening and open it up for a few questions, I'd like to thank the FAF, the FASB, and the GASB for all of your hard work in carrying out your critical roles in maintaining the strength of our capital markets.

The FAF's work in overseeing our U.S. standard setting boards is vital to ensuring that FASB and the GASB have the resources they need and the independence that is essential to creating and maintaining high-quality accounting standards.

Through your combined efforts, the U.S. capital markets today have the transparent, inclusive, and robust standard-setting process that is critical to our competitive position in the global marketplace.

Thank you for allowing me to share my thoughts with you, and I'm happy to answer your questions.


1The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publications or statements by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission, other Commissioners, or the staff.

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