Securities and Exchange Commission Chair Mary Schapiro tried to explode some of the “myths” about the agency’s drawn-out convergence of U.S. GAAP with International Financial Reporting Standards, insisting the SEC is committed to global accounting standards and not simply protecting America’s “parochial” interests.

Speaking by video conference to CFA Institute’s Annual Conference in Boston on Tuesday, Schapiro cited the SEC’s recent statement in support of convergence and global accounting standards. She also disputed the notion that “the U.S. may be committed, but it’s dragging its feet regarding adoption of IFRS.”

“This too is wrong,” she said. “To be clear, while I strongly believe in our commitment to high-quality accounting standards, I believe just as strongly that this commitment is only the beginning of the discussion, not the end.”

Schapiro insisted that the convergence process is critical to the incorporation of IFRS into U.S. accounting standards. “The IASB and FASB must remain vigilant that investors’ needs and protection remain paramount throughout the process,” she said.

She added that the Financial Accounting Standards Board and the International Accounting Standards Board still need to work together on several important areas, including financial assets, revenue recognition, consolidation principles and leases.

Schapiro believes the two boards need time to analyze the input they receive from companies, investors and other stakeholders. “Giving short shrift to process and testing would increase the risk of poor decisions,” she said. “We are committed to convergence. But we are committed, above all, to a convergence exercise that yields high-quality improvements to accounting standards.”

She insisted that the SEC is moving forward on a comprehensive work plan and would provide its next progress report in October. Schapiro also took issue with the myth that the United States is “fixated on process.” She labeled that statement as “inaccurate.”

“The United States understands the importance of process to a successful conclusion,” she said. “We will not accept shortcuts that undermine our larger goals or risk compromising the achievement of high-quality global standards. A critical part of the standards-setting process is ensuring that the IASB and the FASB are shielded from undue political or commercial pressure, particularly now, as they work to finalize a number of their current joint projects.”

Schapiro cited the role of the international Monitoring Board, on which she and other financial regulators sit, in providing an oversight relationship between the IASB and governmental authorities. “It allows regulators to ensure that the mandate to protect investors, market integrity, and capital formation are discharged as convergence moves forward, and enhances that credibility further,” she said. “Although it makes the process of agreeing on global standards more complicated, the presence of the Monitoring Board — as well as other procedural safeguards — is critical to achieving the best possible results.”

Schapiro also took issue with another “myth,” that “America is protecting its parochial interests.”

“What we are protecting are the interests of the investors in our markets, and we always will — that's what the Securities and Exchange Commission does,” she said. “When investors — from anywhere across the globe — participate in our markets, they come under the SEC’s umbrella of protection.”

She insisted that the SEC must continue to work across global borders because of the intertwined nature of the global economy. Schapiro also discussed several other issues facing the SEC, including its probe of repurchase agreements, such as the Repo 105 transactions used by Lehman Brothers.

She noted that in March, the SEC’s Division of Corporation Finance sent letters to the CFOs of large financial institutions seeking detailed information about repurchase agreements, securities lending transactions, or other transactions involving the transfer of financial assets.

“We will use the responses to help determine whether changes in accounting, disclosure, or to the underlying standards themselves, are needed to ensure that investors have accurate information about a firm's leverage and risk,” she said. “You can expect more of these ‘Dear CFO’ letters, as our disclosure staff reviews the filings of financially significant companies more deeply and consistently, and seeks to identify and address significant trends across companies.”

Schapiro noted that the SEC is working with the Senate to strengthen the financial regulatory reform bill, including provisions governing over-the-counter derivatives and standards of conduct for securities professionals providing investment advice. These would lift broker-dealer duties to clients to the same fiduciary level required of registered investment advisors.

Schapiro spoke by video conference to the attendees at the conference because of her involvement in the SEC’s investigation of the sudden market volatility that occurred on May 6. She said the agency would issue preliminary findings and may recommend that additional circuit breakers or “speed bumps” be added to the markets.

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