The Center for Audit Quality and other influential organizations are asking leaders of the House Financial Services Committee to safeguard the role of the SEC in overseeing the Financial Accounting Standards Board.

CAQ executive director Cindy Fornelli, and the leaders of the Council of Institutional Investors and the U.S. Chamber of Commerce, have penned a letter to Chairman Barney Frank, D-Mass., and other leaders of the committee and a key subcommittee. They are concerned about recent proposals to put FASB beneath the oversight of a so-called “systemic risk regulator” as part of a broad overhaul of the financial regulatory structure.

“Efforts to place oversight of, or significant influence on, FASB in another entity whose primary focus is not to serve the interests of investors and the capital markets run the risk of impeding FASB’s ability to promulgate and issue standards for financial reporting that faithfully represent the economic activity of business transactions and provide information that meets the needs of investors and companies for all sectors of the economy,” they wrote. “By placing FASB under the jurisdiction of a structure charged with managing systemic risks to the financial markets, accounting rules will be viewed though the narrow lens of a few large companies from specific industries, rather than considerate of the applicability of financial reporting policies to over 15,000 public companies.”

Fornelli and the others argue that such a narrow focus could “skew standards” and undermine investor confidence.

“We believe that the SEC has been and continues to be best suited to provide the oversight of FASB for such a broad and diverse economy,” the letter read. “As such, we strongly support an independent standards-setting process, subject to public scrutiny and free of undue pressures.”

Rep. Ed Perlmutter, D-Colo., and Frank Lucas, R-Okla., have introduced a bill that would create a Financial Accounting Oversight Board within the council of regulators to provide oversight of the authority of the SEC and FASB for the accounting requirements of public companies.  A version of the bill is expected to be offered as an amendment to the Financial Stability Improvement Act in the next few weeks.

Another letter from the International Banking Federation, whose members include the American Bankers Association, came out Wednesday in favor of greater oversight of FASB and the International Accounting Standards Board with an eye toward systemic risk. The letter, addressed to U.K. Chancellor of the Exchequer Alistair Darling, mostly concerns the recommendations of the G-20 group of world leaders at their Pittsburgh summit and the work of the international Financial Stability Board.

“One area where we believe the FSB must urgently focus is on the convergence of accounting standards,” wrote IBF managing director Sally Scutt. “We note that the Pittsburgh Communiqué called on the international accounting bodies to ‘redouble their efforts to achieve a single set of high-quality, global accounting standards within the context of their independent standard-setting process’. It is therefore with regret that we note the divergent trend in the proposals being considered by the IASB and U.S. FASB to reform the accounting for financial instruments. We urge the FSB to take a clear leadership role in bringing the two bodies together to ensure that progress is made on this front as well as to address the pro-cyclicality of accounting standards and other cross-cutting issues. In developing a new standard for the reporting and measurement of financial instruments, we urge that the principles recently issued by the Basel Committee not be forgotten and form the basis of convergence. It will also be important for the FSB to ensure that the IASB and U.S. FASB assess the systemic implications of their proposals at development stage."

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