20 July 1998
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-6009
Re: Proposed Rule on Improper Professional Conduct of Accountants: File No. S7-16-98
Dear Mr. Katz:
This letter is written in support of the Commission's proposed rule defining "improper professional conduct" of accountants for purposes of imposing sanctions on accountants that practice before the SEC.
The State of Wisconsin Investment Board (SWIB) serves as investment manager for the Wisconsin Retirement System, the tenth largest public pension fund in the U.S. SWIB currently has more than $65 billion under management. As a large institutional investor, SWIB is greatly concerned about maintaining integrity of the financial information provided to investors in public companies.
Reliability of financial data is one of the mainstays that gives investors confidence in our markets and allows American companies to attract capital from around the globe. I note that the proposed rule codifies conduct which the Release states the SEC has "historically treated as improper professional conduct' under Rule 102 (e) (1) (ii)." We support maintaining these historical standards. It is obvious in our view that investors would not be better served by loosening the standards of professionalism required of accountants. Any reduction in the quality of information or the care with which it is developed would be done at the expense of investors.
Investors (and issuers) are ultimately harmed just as much by unreasonable conduct that violates professional standards, where it should have been known that the conduct would make a document upon which investors rely materially misleading, as they are by intentional misconduct. I believe that recklessness and incompetence present as real a danger to investors and integrity of the marketplace as intentional misconduct does. While it might be possible to craft language that more clearly delineates conduct intended to be proscribed by the rule, investors could be severely harmed by establishment of a more lenient standard than that which has been historically applied by the SEC.
Thank you for taking these comments into consideration. Feel free to contact me if you have any questions.
Kurt N. Schacht
Chief Legal Officer