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. Last Updated: 07/27/2016

U.S. Panel Approves Securities Legislation

WASHINGTON -- A U.S. House of Representatives panel approved Tuesday night a sweeping overhaul of accounting and financial disclosure laws, including the creation of a new accounting regulatory board, after defeating amendments offered by Democrats who said the measure might not go far enough to prevent another corporate collapse like that of Enron.

The bill, sponsored by Representative Michael Oxley of Ohio, chairman of the Financial Services Committee, was approved by the committee 49 to 12. Sixteen Democrats voted for the bill after alternative provisions proposed by John LaFalce of New York, the ranking Democrat on the committee, were defeated.

Committee aides said the bill could come up for a vote on the House floor as soon as next week. Lobbyists, however, said that they expected the measure to face competition from a proposal by the chairman of the House Energy and Commerce Committee, Billy Tauzin, a Republican from Louisiana. They said Tauzin had been building support among Democrats and Republicans for his own possible accounting-reform measure. Democrats in the Senate are also proceeding with legislation.

Among other provisions, Oxley's proposal would bar accounting firms from doing certain financial-systems consulting and internal auditing for companies for which they also serve as external auditors; would create a regulatory board under the direct authority of the Securities and Exchange Commission that would certify auditors of publicly traded companies and punish errant auditors; and would require disclosure of the sort of off-balance-sheet deals that contributed to Enron's collapse as well as faster disclosure of stock sales by corporate insiders.

Representative Richard Baker, a Louisiana Republican and co-sponsor of the legislation, said the measure would help settle the "environment of doubt and concern" created by Enron's swift collapse last year. "We are plowing new ground," Baker said. "The overall effect of the bill would be to set a new standard."

But LaFalce criticized the bill as offering only cosmetic changes. Specifically, he said the measure should go further in banning auditors from doing consulting services for the same client. And he said the proposal for a new accounting regulatory board would not give it the proper independence or power to regulate the industry effectively.

The bill lacks other crucial measures, he said, like giving plaintiffs in securities suits more power to pursue accountants and others who "aid and abet" fraud. He also argued that the measure makes it harder for the SEC to bar corporate officers and directors who are clearly unfit from serving in the future, a point strongly disputed by Republicans.

Democrats had also sought to extend the statute of limitations for certain securities-fraud lawsuits as well as institute a "cooling off" period so that accountants could not take a job at a publicly traded company within two years of participating in an external audit of that company.

In other matters in Congress related to Enron, the ranking Democrat on the House Judiciary Committee, John Conyers of Michigan, called again on the Justice Department to appoint a special counsel for the federal criminal inquiry on Enron.

Conyers cited the investigation into Thomas White, the former Enron executive who is now the secretary of the Army. FBI agents have been asking whether conversations White had last fall with former colleagues at Enron may have led him to sell $3 million of Enron stock in October, before the company collapsed, according to people involved in the case. He has said that the conversations were strictly personal and that he sold the shares based on public information.