[Federal Register: July 14, 2008 (Volume 73, Number 135)]
[Notices]
[Page 40418-40426]
[DOCID:fr14jy08-139]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58121; File No. PCAOB-2008-03]

Public Company Accounting Oversight Board; Notice of Filing of
Proposed Changes Regarding Ethics and Independence Rule 3526,
Communication With Audit Committees Concerning Independence, Amendment
to Interim Independence Standards, and Amendment to Rule 3523, Tax
Services for Persons in Financial Reporting Oversight Roles

July 9, 2008.
    Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002 (the
``Act''), notice is hereby given that on April 24, 2008, the Public
Company Accounting Oversight Board (the ``Board'' or the ``PCAOB'')
filed with the Securities and Exchange Commission (the ``Commission''
or ``SEC'') the proposed rule changes described in Items I, II, and III
below, which items have been prepared by the Board. The Commission is
publishing this notice to solicit comments on the proposed rules from
interested persons.

I. Board's Statement of the Terms of Substance of the Proposed Rule
Change

    On April 22, 2008, the Board adopted Ethics and Independence Rule
3526, Communication with Audit Committees Concerning Independence, an
amendment to the Board's Interim Independence Standards, and an
amendment to Rule 3523, Tax Services for Persons in Financial Reporting
Oversight Roles. The proposed rule change text is set out below.
Language deleted by the amendment to Rule 3523 is in brackets. Language
that is added by the amendment to Rule 3523 is italicized.

Rules of the Board

* * * * *

Section 3. Professional Standards

* * * * *

Part 5--Ethics

* * * * *
Subpart I--Independence
* * * * *
Rule 3523. Tax Services for Persons in Financial Reporting Oversight
Roles
    A registered public accounting firm is not independent of its audit
client if the firm, or any affiliate of the firm, during the [audit
and] professional engagement period provides any tax service to a
person in a financial reporting oversight role at the audit client, or
an immediate family member of such person, unless--
    (a) The person is in a financial reporting oversight role at the
audit client only because he or she serves as a member of the board of
directors or similar management or governing body of the audit client;
    (b) The person is in a financial reporting oversight role at the
audit client only because of the person's relationship to an affiliate
of the entity being audited--
    (1) Whose financial statements are not material to the consolidated
financial statements of the entity being audited; or
    (2) Whose financial statements are audited by an auditor other than
the firm or an associated person of the firm; or
    (c) The person was not in a financial reporting oversight role at
the audit client before a hiring, promotion, or other change in
employment event and the tax services are--
    (1) Provided pursuant to an engagement in process before the
hiring, promotion, or other change in employment event; and
    (2) Completed on or before 180 days after the hiring or promotion
event.

    Note: In an engagement for an audit client whose financial
statements for the first time will be required to be audited
pursuant to the standards of the PCAOB, the provision of tax
services to a person covered by Rule 3523 before the earlier of the
date that the firm: (1) Signed an initial engagement letter or other
agreement to perform an audit pursuant to the standards of the
PCAOB, or (2) began procedures to do so, does not impair a
registered public accounting firm's independence under Rule 3523.

* * * * *
Rule 3526. Communication With Audit Committees Concerning Independence
    A registered public accounting firm must--
    (a) Prior to accepting an initial engagement pursuant to the
standards of the PCAOB--
    (1) Describe, in writing, to the audit committee of the issuer, all
relationships between the registered public accounting firm or any
affiliates of the firm and the potential audit client or persons in
financial reporting oversight roles at the potential audit client that,
as of the date of the communication, may reasonably be thought to bear
on independence;
    (2) Discuss with the audit committee of the issuer the potential
effects of the relationships described in subsection (a)(1) on the
independence of the registered public accounting firm,

should it be appointed the issuer's auditor; and
    (3) Document the substance of its discussion with the audit
committee of the issuer.
    (b) At least annually with respect to each of its issuer audit
clients --
    (1) Describe, in writing, to the audit committee of the issuer, all
relationships between the registered public accounting firm or any
affiliates of the firm and the audit client or persons in financial
reporting oversight roles at the audit client that, as of the date of
the communication, may reasonably be thought to bear on independence;
    (2) Discuss with the audit committee of the issuer the potential
effects of the relationships described in subsection (b)(1) on the
independence of the registered public accounting firm;
    (3) Affirm to the audit committee of the issuer, in writing, that,
as of the date of the communication, the registered public accounting
firm is independent in compliance with Rule 3520; and
    (4) Document the substance of its discussion with the audit
committee of the issuer.
Amendment to PCAOB Interim Independence Standards
    Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees (``ISB Standard No. 1''), ISB
Interpretation 00-1, The Applicability of ISB Standard No. 1 When
``Secondary Auditors'' Are Involved in the Audit of a Registrant, and
ISB Interpretation 00-2, The Applicability of ISB Standard No. 1 When
``Secondary Auditors'' Are Involved in the Audit of a Registrant, An
Amendment of Interpretation 00-1, are superseded by Rule 3526.

II. Board's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rule Change

    In its filing with the Commission, the Board included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rules. The text of
these statements may be examined at the places specified in Item IV
below. The Board has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of such statements.

A. Board's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rule Change

(a) Purpose
    Section 103(a) of the Act directs the Board, by rule, to establish
``ethics standards to be used by registered public accounting firms in
the preparation and issuance of audit reports, as required by th[e] Act
or the rules of the Commission, or as may be necessary or appropriate
in the public interest or for the protection of investors.'' Moreover,
Section 103(b) of the Act directs the Board to establish such rules on
auditor independence ``as may be necessary or appropriate in the public
interest or for the protection of investors, to implement, or as
authorized under, Title II of th[e] Act.''
    The Board adopted Rule 3526, Communication with Audit Committees
Concerning Independence, because it believed that the accounting firm
should discuss with the audit committee before accepting an initial
engagement pursuant to the standards of the PCAOB any relationships the
accounting firm has with the issuer that may reasonably be thought to
bear on its independence. The rule is intended to build on the
communication requirements in Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees (``ISB No. 1'') and
provide the audit committee with information--including information
about the firm's relationships with persons in financial reporting
oversight roles (``FROR'') at the company--that may be important to its
determination about whether to hire the firm as the company's auditor.
The rule also requires a registered firm on at least an annual basis
after becoming the issuer's auditor to make a similar communication and
also affirm to the audit committee of the issuer, in writing, that the
firm is independent. The Board intends for these communications to
provide the audit committee with sufficient information to understand
how a particular relationship might affect independence and to foster a
robust discussion between the firm and the audit committee. The rule
also includes a new requirement for the firm to document the substance
of its discussion with the audit committee.
    The Board adopted amendments to Rule 3523, Tax Services for Persons
in Financial Reporting Oversight Roles, to exclude the portion of the
audit period that precedes the beginning of the professional engagement
period. The Board believes that it is not necessary for the rule to
restrict the provision of tax services during the portion of the audit
period that precedes the professional engagement period. The Board also
added a note to Rule 3523 that states that in an engagement for an
audit client whose financial statements for the first time will be
required to be audited pursuant to the standards of the PCAOB, the
provision of tax services to persons covered by Rule 3523 before the
earlier of the date that the firm (1) signed an initial engagement
letter or other agreement to perform an audit pursuant to the standards
of the PCAOB or (2) began procedures to do so, does not impair a
registered public accounting firm's independence under Rule 3523.
    The proposed rule changes also amend the PCAOB interim independence
standards because Rule 3526 will supersede the Board's interim
independence requirement, ISB No. 1, and two related interpretations.
(b) Statutory Basis
    The statutory basis for the proposed rule is Title I of the Act.

B. Board's Statement on Burden on Competition

    The Board does not believe that the proposed rule changes will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
rule changes would apply equally to all registered public accounting
firms.

C. Board's Statement on Comments on the Proposed Rule Change Received
From Members, Participants, or Others

    The Board released the proposed rules for public comment in PCAOB
Release No. 2007-008 (July 24, 2007). The Board received 16 written
comments. A copy of PCAOB Release No. 2007-008 and the comment letters
received in response to the PCAOB's request for comment are available
on the PCAOB's Web site at www.pcaobus.org. The Board has carefully
considered all comments it has received. In response to the written
comments received, the Board has clarified and modified certain aspects
of the proposed rule change, as discussed below.
Rule 3526. Communication With Audit Committees Concerning Independence
    Under Section 301 of the Act, ``[t]he audit committee of each
issuer, in its capacity as a committee of the board of directors, shall
be directly responsible for the appointment, compensation, and
oversight of the work of any registered public accounting firm employed
by that issuer * * * for the purpose of preparing or issuing an audit
report or related work * * *.'' \1\ PCAOB interim

independence standards require the auditor to provide certain
information to the audit committee about independence that could assist
the audit committee in fulfilling these oversight responsibilities.
Specifically, ISB No. 1 requires, among other things, firms to disclose
at least annually to the audit committee all relationships between the
auditor and its related entities and the company and its related
entities that, in the auditor's professional judgment, may reasonably
be thought to bear on the auditor's independence. ISB No. 1 does not,
however, require the firm to provide information to the audit committee
about the firm's independence in connection with becoming the issuer's
auditor (i.e., before the person or firm becomes the issuer's auditor).
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    \1\ The SEC has implemented this provision by adopting rules
directing the national securities exchanges and national securities
associations to prohibit the listing of any security of an issuer
that is not in compliance with the audit committee requirements
mandated by the Act.
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    As discussed in the proposing release, the Board proposed Rule 3526
because it believed that the accounting firm should discuss with the
audit committee before accepting an initial engagement pursuant to the
standards of the PCAOB any relationships the accounting firm has with
the issuer that may reasonably be thought to bear on its independence.
The proposed rule was intended to build on the communication
requirements in ISB No. 1 and provide the audit committee with
information--including information about the firm's relationships with
persons in FRORs at the company--that may be important to its
determination about whether to hire the firm as the company's auditor.
The Board also proposed to include in the rule a new requirement for
the firm to document the substance of its discussion with the audit
committee.
    All commenters were generally in favor of the Board adopting the
proposed rule, and, as discussed more fully below, some recommended
modifications. Commenters stated that Rule 3526 would assist audit
committees in fulfilling their responsibilities and would aid them in
their decision-making process. After carefully considering the
comments, the Board is adopting Rule 3526 with one modification, as
described below. If approved by the SEC, Rule 3526 will supersede ISB
No. 1 and two related interpretations.\2\
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    \2\ ISB Interpretation 00-1, The Applicability of ISB Standard
No. 1 When ``Secondary Auditors'' Are Involved in the Audit of a
Registrant, and ISB Interpretation 00-2, The Applicability of ISB
Standard No. 1 When ``Secondary Auditors'' Are Involved in the Audit
of a Registrant, An Amendment of Interpretation 00-1. The
interpretations state that the responsibility to comply with ISB No.
1 rests solely with the primary auditor, but that the primary
auditor should include in its report to the audit committee all of
its relationships and those of its domestic and foreign associated
firms that could reasonably bear on the independence of the primary
auditor. Under these interpretations, if the primary auditor is
relying on the work of secondary auditors not associated with the
primary auditor's firm, the report of the primary auditor should
either describe any such secondary auditors' relationships, or it
should state that it does not do so. The treatment of secondary
auditors under Rule 3526 will be similar to the treatment of
secondary auditors under ISB No. 1 and the two interpretations.
Secondary auditors will not need to comply with Rule 3526, but the
primary auditor will need to disclose to the audit committee any
relationships of the firm's affiliates that could reasonably be
thought to bear on the independence of the primary auditor. As under
ISB No. 1 and the related interpretations, the scope of any
communications about secondary auditors under Rule 3526 should be
clear to the audit committee. Accordingly, the Board expects the
primary auditor's report to either include any covered relationships
of any secondary auditors not affiliated with the firm or state that
it does not do so. One commenter recommended that the Board consider
providing an exemption for secondary auditors. Because the rule does
not require communications by secondary auditors, an exemption is
not necessary.
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Scope of the Required Communication
    The Board proposed in Rule 3526(a) to require the registered firm,
prior to accepting an initial engagement pursuant to the standards of
the PCAOB, to describe in writing to the audit committee \3\ all
relationships between the accounting firm or any affiliates of the firm
\4\ and the potential audit client or persons in FRORs at the potential
audit client that may reasonably be thought to bear on independence.
The Board also proposed to require the firm to discuss with the audit
committee the potential effects of those relationships on the firm's
independence. In Rule 3526(b), the Board proposed to require a
registered firm on at least an annual basis after becoming the issuer's
auditor to provide the same information described above and also affirm
to the audit committee of the issuer, in writing, that the firm is
independent in compliance with Rule 3520, Auditor Independence.\5\ As
described in the proposing release, the Board intended for these
communications to provide the audit committee with sufficient
information to understand how a particular relationship might affect
independence and to foster a robust discussion between the firm and the
audit committee.
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    \3\ One commenter recommended the Board provide guidance in
situations in which an issuer does not have an audit committee.
Under Section 2(a)(3) of the Act, ``[t]he term `audit committee'
means--(A) a committee (or equivalent body) established by and
amongst the board of directors of an issuer for the purpose of
overseeing the accounting and financial reporting processes of the
issuer and audits of the financial statements of the issuer; and (B)
if no such committee exists with respect to an issuer, the entire
board of directors of the issuer.'' Accordingly, under Rule 3526, if
an audit client does not have an audit committee, the auditor would
be required to make the communications to the entire board of
directors.
    Additionally, one commenter recommended that audit committees
provide better disclosure, through the proxy, when approving non-
audit services performed by the auditor. The commenter stated that
providing this type of transparency will permit investors a greater
ability to evaluate audit committee's fiduciary performance of
shareholders. The Board does not have statutory authority to require
disclosure by audit committees.
    \4\ One commenter recommended that the Board adopt a definition
of affiliate of the firm. This term is already defined in Rule 3501.
    \5\ Rule 3520 states that a registered public accounting firm
and its associated persons must be independent of the firm's audit
client throughout the audit and professional engagement period.
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    Commenters generally believed that the scope of the required
communications was appropriate. Several commenters noted that, to a
large extent, firms are already making the kinds of communications that
would be required by proposed Rule 3526. One commenter acknowledged,
however, that existing communications between the firm and a potential
new audit client do not include the disclosure of tax services to a
person in a FROR or his or her immediate family member. Additionally,
some registered firms noted that communications regarding the auditor's
independence currently vary in content and timing and may, in some
instances, occur only orally.
    Most commenters did not believe that it was necessary for the Board
to expand the scope of the required communication to include any
additional matters. One commenter, however, recommended requiring the
firm to confirm its independence in writing to the audit committee
prior to accepting an initial engagement. Another commenter recommended
revising Rule 3526(a) to require the firm to make the communications in
its initial proposal to the company's audit committee.
    As discussed above, the Board proposed to require firms to affirm
their independence annually but did not propose a similar requirement
that would apply before the firm is initially engaged as the company's
auditor. Rule 3526(a) requires registered firms to make certain
communications about relationships that may reasonably be thought to
bear on independence before accepting an initial engagement pursuant to
the standards of the PCAOB. Rather than prescribing a particular time
before that point when the communications must occur, however, the rule
allows registered firms and audit committees the flexibility to make
that determination. The Board understands that, in some cases, firms
need time before a new engagement

begins to resolve any matters that could impair their independence. If
a firm were required to affirm its independence prior to accepting a
new engagement, it would need to wait until it has resolved any
independence issues to make the required communications. These
communications are intended to assist the audit committee in fulfilling
its responsibility to hire the auditor--their usefulness for that
purpose may diminish if they are left until immediately before the
engagement begins. Accordingly, the Board does not believe a
requirement for auditors to affirm that they are independent before
accepting a new engagement is appropriate.
    Other commenters recommended certain exclusions from the scope of
the required communications. For example, one commenter asserted that
the auditor cannot be expected to know about all relationships that may
reasonably be thought to bear on its independence, and recommended that
the written communication to the audit committee state that the
auditor's assessment is based on information provided to the auditor by
the issuer. The Board does not believe that allowing auditors to
include such a limitation in the communication would be appropriate.
Complying with the Board's independence requirements is the
responsibility of the auditor.\6\ To fulfill this responsibility, as
well as their related responsibility under the SEC's independence
rules, auditors need to ascertain what relationships with the issuer
and persons in FRORs at the issuer may reasonably be thought to bear on
their independence. Moreover, some of the information the auditor must
assess in order to assure its independence and that may need to be
communicated under Rule 3526--such as the firm's or its associated
persons' financial interests in the audit client--can be more readily
obtained by the auditor than its audit client.
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    \6\ Another commenter suggested that the audit committee should
be able to rely on the firm to determine and resolve any
independence issues, and that a requirement for the auditor to
discuss these matters with the audit committee would increase the
responsibilities of the audit committee with respect to
independence. This commenter recommended that the Board not adopt
these requirements. As discussed above, the rule is intended to
provide audit committees with information to assist them in carrying
out their responsibilities to oversee the audit engagement, but
auditors remain responsible for complying with the independence
requirements. Nothing in the rule adds to, or otherwise modifies,
the responsibilities of the audit committee.
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    Another commenter recommended that the Board exclude tax services
to a person in a FROR from the required communications because the
commenter believed that compliance with Rule 3523, as amended, should
adequately address any independence concerns regarding such services.
As discussed in the proposing release, Rule 3526 is intended to require
disclosure of not only whether the firm provided any specifically
prohibited services or maintained any specifically prohibited
relationships, but also whether any of the firm's relationships or
services may reasonably be thought to bear on independence under the
SEC's general standard of auditor independence \7\ and AU sec. 220,
Independence.\8\ Because auditors will need to consider the relevant
facts and circumstances in order to make such a determination, the
Board does not believe that per se exemptions are appropriate.
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    \7\ 17 CFR 210.2-01(b). Under that standard, an accountant is
not independent if ``the accountant is not, or a reasonable investor
with knowledge of all relevant facts and circumstances would
conclude that the accountant is not, capable of exercising objective
and impartial judgment on all issues encompassed within the
accountant's engagement.'' In considering this general standard, the
SEC ``looks in the first instance to whether a relationship or the
provision of service: Creates a mutual or conflicting interest
between the accountant and the audit client; places the accountant
in the position of auditing his or her own work; results in the
accountant acting as management or an employee of the audit client;
or places the accountant in a position of being an advocate for the
audit client.'' 17 CFR 210.2-01, preliminary note.
    \8\ AU sec. 220, Independence, requires that ``[i]n all matters
relating to the assignment, an independence in mental attitude is to
be maintained by the auditor * * *'' AU sec. 220 notes that ``[i]t
is of utmost importance to the profession that the general public
maintain confidence in the independence of independent auditors''
and that public confidence in the auditor's independence ``would be
impaired by evidence that independence was actually lacking, and it
might also be impaired by the existence of circumstances which
reasonable people might believe likely to influence independence.''
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    Some commenters suggested that, in certain circumstances, firms
would be restricted in the information they could provide to the audit
committee about relationships with persons in FRORs due to legal
limitations imposed by confidentiality and privacy laws. Specifically,
one commenter was concerned that the auditor would not be able to
disclose to the audit committee information about tax services rendered
to a person in a FROR prior to obtaining a consent from that person.
Another commenter recommended that the Board address the need for
obtaining such a consent in its final release, while another
recommended that the Board provide an exemption in circumstances where
applicable legal restrictions impede an auditor's ability to comply
fully with the disclosure requirement.
    Under ISB No. 1, auditors have been required to disclose to the
audit committee relationships with the company and its related entities
and to discuss the auditor's independence with the audit committee.
Accordingly, the required communications could include discussion of
tax or other services provided to an entity or person other than the
company itself. The Board understands that firms are subject to certain
confidentiality requirements in the tax context \9\ and that other
restrictions could arise outside of that context, depending on the
facts and circumstances that a particular relationship presents. The
Board is not, however, aware that firms have encountered difficulty in
communicating with audit committees, as required by ISB No. 1 or any
other professional practice standard, as a result of such privacy
requirements.
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    \9\ See 26 U.S.C. 7216; 26 CFR 301.7216-3 (prohibiting
disclosure or use of tax return information without written consent
of taxpayer that meets specified requirements); 26 CFR 301.7216-1
(defining ``tax return information'' to mean ``any information,
including, but not limited to a taxpayer's name, address, or
identifying number, which is furnished in any form or manner for, or
in connection with, the preparation of a tax return of the
taxpayer'').
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    As described above, Rule 3526 is a general requirement that, like
ISB No. 1, requires disclosure of certain relationships that may be
relevant to the audit committee's oversight of the engagement. It does
not set forth a list of relationships that must always be disclosed or
mandate specific information that must be communicated when disclosure
is required. Rather, Rule 3526 allows firms significant flexibility to
determine how to comply with the requirements to describe a covered
relationship and discuss the potential effects of that relationship on
the firm's independence. Accordingly, while the Board will monitor the
application of the rule in this regard, it does not believe that the
recommended exception is necessary or appropriate at this time.
    The Board also received several comments on its proposal not to
include the words ``in the auditor's professional judgment'' in the
rule's description of the scope of the required communications. ISB No.
1 requires disclosure of certain relationships that ``in the auditor's
professional judgment may reasonably be thought to bear on
independence.'' In the proposing release, the Board explained that it
believed that omitting the reference to the auditor's professional
judgment would clarify the requirement by reminding auditors of the
need to focus on the perceptions of reasonable third parties when
making independence determinations.

    Some commenters supported the proposed exclusion of the words ``in
the auditor's professional judgment'' from Rule 3526. Other commenters,
however, believed that the absence of the reference to judgment could
confuse, rather than clarify, the requirement and noted that it is
reasonable and appropriate for audit committees to rely on the
accounting firm's judgment as to what matters should be disclosed. One
of these commenters contended that this aspect of the Board's proposal
is inconsistent with the Board's recent focus on the importance of the
use of auditor judgment. Conversely, one commenter did not object to
the absence of a reference to judgment, provided that the adopting
release contain an acknowledgement that the auditor must apply judgment
in determining which matters are required to be communicated to the
audit committee.\10\
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    \10\ Additionally, one commenter recommended including the
reference to judgment and also referring to the SEC's general
standard of auditor independence and the preliminary note to the
SEC's independence rules in the proposed rule or the adopting
release. Footnote 9 of the Board's adopting release refers to the
general standard and the preliminary note.
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    As the Board explained in the proposing release, auditors will need
to apply judgment to determine whether a relationship may reasonably be
thought to bear on independence. After considering commenters' views,
the Board continues to believe that adding specific reference to the
auditor's professional judgment is unnecessary and inappropriate in
this instance. While the Board agrees that auditors must exercise sound
judgment in carrying out their responsibilities, it does not believe
that specific reference to judgment in this rule is necessary to
encourage auditors to do so. Judgment is called for in applying any
reasonableness standard to particular facts and circumstances, and Rule
3526 is no different. Determining what relationships may reasonably be
thought to bear on independence requires consideration of how a third
party--not the auditor--would view the relationship, which is
consistent with the SEC's general standard of auditor independence and
AU sec. 220. A reference to ``in the auditor's professional judgment''
could suggest otherwise, however, and therefore could discourage the
necessary analysis. Accordingly, the Board has determined not to add
the phrase to Rule 3526.
Time Period Covered by Rule 3526(a)
    In the proposing release, the Board solicited comment on whether
the initial communication in Rule 3526(a) should be limited to
relationships that existed during a particular period, and, if so, how
long that period should be. Commenters provided a wide variety of
recommendations in this area. Some commenters stated that the initial
communication should not be limited to relationships that existed
during a particular period. Some of these commenters noted that
establishing a specific period could result in arbitrary exclusion of
certain relationships and recommended that the audit committee and
auditor be responsible for determining the relevant time frame.
    Other commenters recommended that the time period be limited to the
audit and professional engagement period because, according to these
commenters, the relevant relationships are those that exist currently
or will continue to exist. One of these commenters stated that
requiring communication of relationships that existed prior to this
period would cause an unnecessary burden on the firm to identify and
communicate these matters and on the audit committee to consider such
information, because the firm was not subject to the auditor
independence rules with respect to the audit client before the
beginning of the audit and professional engagement period. One
commenter recommended that the required time period should, at a
minimum, be the audit period and that the rule should require auditors
to consider communicating relationships that existed before that time.
Finally, one commenter recommended that the time period should be no
longer than two years prior to the commencement of the audit period,
and two commenters recommended that the proposed rule should cover a
time period of at least three years.
    After considering these comments, the Board has determined that the
initial communication required by Rule 3526(a) should not be limited to
relationships that existed during a particular time period. While the
Board agrees that a relationship that existed during the audit and
professional engagement period may be more likely to bear on
independence than a relationship that ended substantially before that
time, it does not believe that the passage of time is the only factor
relevant to a determination of whether a relationship may reasonably be
thought to bear on independence. The nature of the relationship must
also be considered. For example, if the firm customized and implemented
the company's financial reporting system, that relationship, depending
on the circumstances, might reasonably be thought to bear on
independence even if the engagement to design the system was concluded
before the beginning of the audit and professional engagement period.
Determining whether a particular relationship is covered by Rule
3526(a) will, therefore, depend on the relevant facts and
circumstances.
    The Board is making one modification to the rule in response to a
comment recommending that Rule 3526 make clear that the relationships
required to be disclosed are those that may reasonably be thought to
bear on independence as of the date of the communication. Because the
relevant relationships are those that continue to bear on independence
at the time of the communication, the Board has modified the rule by
adding the words ``as of the date of the communication'' where
appropriate. This clarification should help firms distinguish
relationships that are covered by the rule from those that are not.
    This modification should also clarify that, if a relationship may
reasonably be thought to bear on independence as of the date of the
communication, it must be disclosed regardless of whether it was
disclosed in a prior year. Some commenters suggested that auditors
should not be required to repeat a previously made disclosure. The
Board believes that an earlier disclosure may reduce the amount of
information that needs to be disclosed, but it does not obviate the
need for disclosure altogether. If the nature of the relationship and
the potential effects of the relationship on independence remain
substantially unchanged, a reference to the earlier disclosure will
generally be sufficient when disclosure is required. Moreover, as
discussed above, after some amount of time, the length of which depends
on the nature of the relationship, a relationship may no longer
reasonably be thought to bear on independence and, therefore, would no
longer need to be disclosed.
Timing of the Communications
    As discussed above, the Board proposed Rule 3526(a) because it
believed that auditors should communicate relevant information about
independence before becoming the issuer's auditor. A few commenters
expressed concern that the proposed rule could cause undue burden on
private companies pursuing an initial public offering if the
communication were required before the auditor accepts an engagement to
assist an existing private company client in going public. According to
commenters, a requirement to complete the independence assessment
before the auditor could commence work related to

the initial public offering might disadvantage the audit client by
causing delay. One commenter stated that auditors generally begin work
on the initial public offering based upon an initial review of
relationships between the accounting firm and the company and complete
their independence assessment before the company's registration
statement is filed. This commenter suggested that the Board reconsider
the required timing of the communications in the context of an initial
public offering.
    After considering these comments, the Board has determined that
relieving a firm whose private company audit client is pursuing an
initial public offering from compliance with Rule 3526 is not necessary
or appropriate. As discussed above, the rule is intended to provide
audit committees with the information they need to effectively oversee
the audit engagement. When a private company undertakes an initial
public offering, it must, for the first time, have its financial
statements audited by an auditor that is independent within the meaning
of the rules of the SEC and PCAOB. Among other decisions an audit
committee must make is whether to engage its existing auditor for the
initial public offering or whether to retain a new auditor for that
purpose. In this context, the Board believes that the communication
about an existing auditor's independence--which is relevant to the
existing auditor's ability to continue as the company's auditor
through, and after, the initial public offering--should not be delayed
until just before the registration statement is filed. Moreover, the
Board believes that this evaluation will not cause an unnecessary
burden because the private company is already a client of the
accounting firm and therefore should already be aware of most of the
relationships that would need to be communicated.
    The Board also received comment on the timing of the annual
communication requirement that the Board proposed in Rule 3526(b). Like
ISB No. 1, proposed Rule 3526 did not specify when during the year the
firm would be required to make the annual communication.\11\ One
commenter recommended that the Board specify in Rule 3526(b) when the
annual communication should take place to make sure that these critical
discussions do not take place at the end of the audit engagement. The
commenter recommended that the proposed rule be changed to state that
firms should apply Rule 3526 as early in the audit process as
practicable, preferably during the planning stage of the audit. One
commenter recommended that the communication occur before substantial
planning procedures commence, while another recommended that the annual
communication should take place at the time the engagement letter is
signed and then again near the end of the audit. Finally, one commenter
recommended adding a section to Rule 3526 requiring an auditor to
update the communications when he or she becomes aware of a covered,
previously unknown or new relationship.
---------------------------------------------------------------------------

    \11\ The Board understands that, under ISB No. 1, the
communication typically occurs at the end of the audit when the
financial statements are issued.
---------------------------------------------------------------------------

    After considering these comments, the Board does not believe it is
appropriate to mandate specifically when the Rule 3526(b) annual
communication takes place. In most cases, the communications will be
more useful if they take place near the beginning of the audit process.
However, by not prescribing the timing of the communication, Rule
3526(b) will allow the auditor and audit committee to determine the
timing that is most appropriate in the circumstances of the particular
engagement. Similarly, the Board does not believe that it is necessary
for the rule to explicitly address how a firm should correct an
incomplete communication.
Rule 3523. Tax Services for Persons in Financial Reporting Oversight
Roles
Amendment to Rule 3523 To Exclude the Portion of the Audit Period That
Precedes the Professional Engagement Period
    Rule 3523, as adopted by the Board, prohibits a registered public
accounting firm, or an affiliate of the firm, from providing tax
services during the ``audit and professional engagement period'' to a
person in, or an immediate family member of a person in, a FROR at the
audit client. Consistent with the SEC's independence rules,\12\ the
phrase ``audit and professional engagement period'' is defined to
include two discrete periods of time. The ``audit period'' is the
period covered by any financial statements being audited or
reviewed.\13\ The ``professional engagement period'' is the period
beginning when the firm either signs the initial engagement letter or
begins audit procedures, whichever is earlier, and ends when either the
company or the firm notifies the SEC that the company is no longer that
firm's audit client.\14\
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    \12\ 17 CFR 210.2-01(f)(5).
    \13\ Rule 3501(a)(iii)(1).
    \14\ Rule 3501(a)(iii)(2).
---------------------------------------------------------------------------

    In circumstances in which a registered firm has been the auditor
for an audit client for more than a year, the ``audit period'' is a
subset of the ``professional engagement period.'' However, when a
registered firm accepts a new audit client, the audit period may cover
a period of time before the commencement of the professional engagement
period. In such circumstances, Rule 3523, as adopted, provides that the
firm is not independent of its audit client if the firm, or an
affiliate of the firm, provided tax services to a person covered by
Rule 3523 during the audit period but before the beginning of the
professional engagement period. This aspect of the rule therefore
effectively prevents a firm from accepting a new audit client if the
firm, or an affiliate of the firm, provided tax services to such a
person during the period covered by any financial statements to be
audited or reviewed.
    In preparing for implementation of the Board's tax services and
independence rules, the Board decided to revisit the application of
Rule 3523 to tax services provided during the audit period. As
discussed above, on April 3, 2007, the Board issued a concept release
to solicit comment about the possible effects on a firm's independence
of providing tax services to a person covered by Rule 3523 during the
portion of the audit period that precedes the beginning of the
professional engagement period, and other practical consequences of
applying the restrictions imposed by Rule 3523 to that portion of the
audit period. After careful consideration of comments received in
response to the concept release, the Board, on July 24, 2007, proposed
to amend the rule to exclude the portion of the audit period that
precedes the beginning of the professional engagement period.\15\
---------------------------------------------------------------------------

    \15\ See PCAOB Release No. 2007-008, which includes a discussion
of the comments the Board received on the concept release.
---------------------------------------------------------------------------

    The Board received 13 comments on the proposed amendment to Rule
3523. Almost all of the commenters supported the Board's recommendation
to amend Rule 3523.\16\ Many of these commenters

reiterated their belief that the firm's independence would not be
affected by the provision of tax services to a person in a FROR during
the portion of the audit period that precedes the beginning of the
professional engagement period. Commenters also reaffirmed their belief
that, if Rule 3523 is not amended, it could adversely affect companies'
ability to change auditors by limiting the companies' choice of
auditors.
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    \16\ Only one commenter on the proposed rule objected to the
amendment of Rule 3523. This commenter's objection stemmed from the
contention that the terms ``professional engagement period'' and ``a
person in a financial reporting role'' were not defined. Definitions
for ``professional engagement period'' and ``financial reporting
oversight role'' are provided under Rules 3501(a)(iii)(2) and
3501(f)(i), respectively. The same commenter, while not specifically
addressing the proposed amendment, also expressed concern with Rule
3523(a), which provides an exception for tax services to a person
who is in a FROR only because he or she serves as a member of the
Board of Directors, and, referring to the responsibilities of
directors, recommended deleting this section in its entirety. This
commenter also recommended that the Board eliminate Rule 3523(b),
which provides an exception, under certain circumstances, for tax
services to a person who is in a FROR only because of the person's
relationship to an affiliate of the entity being audited. The Board
does not believe that eliminating these exceptions is warranted.
---------------------------------------------------------------------------

    The Board has carefully considered these comments, as well as the
comments on the concept release,\17\ and determined to adopt the
amendment to Rule 3523. The Board continues to believe that it is not
necessary for the rule to restrict the provision of tax services during
the portion of the audit period that precedes the professional
engagement period. Rule 3523 relates to services provided to
individuals and not the audit client that issues the financial
statements subject to audit. Additionally, registered firms would
remain responsible for considering the relevant facts and circumstances
of a specific tax engagement and determining whether their independence
is impaired under the SEC's general standard of auditor
independence.\18\
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    \17\ In response to the concept release, two commenters stated
that Rule 3523 should not be amended to exclude the portion of the
audit period that precedes the professional engagement period. These
commenters believed that providing tax services to a person in a
FROR during the audit period impairs independence, and suggested
that audit firms may plan for a change of auditors sufficiently in
advance to avoid or minimize any problems resulting from the
application of the rule to the audit period.
    \18\ 17 CFR 210.2-01(b); see footnote 7.
---------------------------------------------------------------------------

    One commenter objected to the discussion in the proposing release
(and included here in the paragraph above) describing the firm's
obligation to consider whether the firm's independence is impaired
under the SEC's general standard of auditor independence. This
commenter stated that the discussion sends a contradictory message by
calling for firms to assess whether their independence is impaired
despite the Board's conclusion that restrictions are unnecessary to
preserve independence. The Board disagrees. As a result of the Board's
amendment, firms will not be specifically prohibited by Rule 3523 from
providing tax services to persons in a FROR during the portion of the
audit period that precedes the professional engagement period. That
does not mean, however, that such services are categorically permitted.
Rather, as discussed in the proposing release, the amendment reflects
the Board's belief that a more tailored approach, based on facts and
circumstances and measured against the general standard of auditor
independence, is preferable to a per se prohibition. Accordingly, as
with any other service or relationship that is not specifically
prohibited by the independence rules, firms must determine whether the
service or relationship impairs independence under the SEC's general
standard of auditor independence.
Application of Rule 3523 to New Issuers
    The Board proposed adding a note to Rule 3523 concerning the
application of Rule 3523 in the context of an initial public offering
in light of comments received on the concept release. The proposed note
stated that, in the context of an initial public offering, the
provision of tax services to a person covered by Rule 3523 before the
earlier of the date that a registered firm: (1) Signed an initial
engagement letter or other agreement to perform an audit pursuant to
the standards of the PCAOB, or (2) began procedures to do so, does not
impair a firm's independence under Rule 3523. Commenters generally
recommended that the Board adopt the note and encouraged the Board to
consider expanding it to include other corporate life events, noting
that corporate life events other than an initial public offering may
also result in the need for an audit client's financial statements to
be audited pursuant to the standards of the PCAOB for the first
time.\19\
---------------------------------------------------------------------------

    \19\ Commenters suggested the following as examples of when an
audit client's financial statements would, for the first time, need
to be audited pursuant to the standards of the PCAOB--mergers,
reverse mergers in which a privately-held entity merges with a
public company and succeeds to the public company's reporting
obligations under the Securities Exchange Act of 1934, issuance of
publicly traded debt, issuance of partnership or other units,
inclusion of a public company's securities in an employee benefit
plan, decision by a foreign private issuer to list its securities in
the United States, and companies that have greater than 500 U.S.
shareholders and total assets exceeding $10 million as of the latest
fiscal year-end.
---------------------------------------------------------------------------

    In response to these comments, the Board determined to revise the
note to Rule 3523 to describe events, other than just initial public
offerings, pursuant to which a company's financial statements must be
audited in accordance with the standards of the PCAOB for the first
time. Specifically, the Board replaced the words ``[i]n the context of
an initial public offering'' with ``[i]n an engagement for an audit
client whose financial statements for the first time will be required
to be audited pursuant to the standards of the PCAOB.'' This situation
may occur when a company decides to conduct an initial public offering
of its securities,\20\ which would require the company to file, for the
first time, a registration statement under the Securities Act of 1933.
Additionally, this situation may occur when a foreign private issuer
decides to list its securities on a national securities exchange, which
would require the company to register its securities, for the first
time, under the Securities Exchange Act of 1934. In both cases, the
company's audited financial statements would be required, for the first
time, to be audited pursuant to the standards of the PCAOB.\21\
---------------------------------------------------------------------------

    \20\ The company may offer equity securities, debt securities,
limited partnership interests, trust interests, or another type of
securities in the initial public offering.
    \21\ The Board intends the note to Rule 3523 to describe all
circumstances in which a company that was not an ``issuer,'' as
defined by the Act, becomes an issuer as a result of a corporate
life event or otherwise. These circumstances include those in which
a private company that was once an issuer becomes an issuer again.
As long as the company was not required to have its financial
statements audited pursuant to the standards of the PCAOB prior to
being required to do so, the Board will consider the requirement to
be a ``first-time'' requirement for purposes of the note.
---------------------------------------------------------------------------

    The Board does not believe it is appropriate to list in the note
the various corporate life events identified by commenters, such as
mergers or acquisitions, reverse mergers or other similar transactions.
The relevant factor is not the name given to a transaction or event but
whether the transaction or event triggers the initial requirement for
an audit pursuant to the standards of the PCAOB. For example, the
surviving company in a merger or acquisition transaction may be an
issuer that is already filing with the SEC financial statements
required to be audited pursuant to the standards of the PCAOB. The
Board did not intend the note to Rule 3523 to describe such a
scenario.\22\ By focusing on the need for a first-time audit pursuant
to the standards of the PCAOB, the company and its auditors are better
able to determine whether a

proposed transaction or corporate life event is described by the note.
---------------------------------------------------------------------------

    \22\ Another example is a private operating company becoming a
reporting company through a reverse merger with a reporting shell
company. In this scenario, even though the operating company assumes
the reporting obligations of the former shell company, the surviving
reporting company is the former shell company whose financial
statements already were required to be audited pursuant to the
standards of the PCAOB. Therefore, the note to Rule 3523 does not
describe this situation.
---------------------------------------------------------------------------

    One commenter stated that, while it is easy to identify the date on
which the initial engagement letter to perform an audit pursuant to the
standards of the PCAOB is signed, it would be very difficult to apply
the second prong of the note, which requires identification of the date
that the auditor began procedures to perform an audit pursuant to the
standards of the PCAOB, especially if the registered firm audited the
company's prior years' financial statements.\23\ Another commenter
similarly questioned whether this period begins when the auditor begins
planning for the audit. The Board recognizes that, in certain
circumstances, it may be difficult to identify when a continuing
auditor began procedures pursuant to the standards of the PCAOB. An
auditor begins procedures for purposes of Rule 3523 when he or she
begins procedures, including required audit planning procedures, to
update its earlier audits to conform them to the standards of the PCAOB
or begins procedures on a new audit pursuant to those standards. This
point in time will depend on the facts and circumstances of the
particular engagement and corporate life event, rather than on any more
specific triggering event that the Board could establish by rule.
---------------------------------------------------------------------------

    \23\ The commenter noted that, when a company undertakes an
initial public offering, it is required to include in the
registration statement audited financial statements for its past
three completed fiscal years. These financial statements may have
previously been audited pursuant to generally accepted auditing
standards (``GAAS''). The commenter was concerned that if the
company does not retain a new auditor for its initial public
offering, there may be a question as to whether the auditor should
consider its audits of the prior years in assessing when it ``began
procedures'' as provided under the note to Rule 3523. An auditor
should not consider work already performed on previously completed
GAAS audits for determining when the auditor ``began procedures''
because those audits were not performed pursuant to the standards of
the PCAOB.
---------------------------------------------------------------------------

Transition Periods
    Rule 3523 prohibits the provision of tax services to covered
persons once the professional engagement period begins. Some commenters
on the concept release recommended that the Board amend Rule 3523 to
allow a transition period after a company changes auditors so that the
new auditor may complete any tax services in progress to any persons in
FRORs affected by the issuer's change of auditors.\24\ Other commenters
stated that tax services to persons in FRORs should, as is currently
required, cease before the professional engagement period begins. The
Board decided to seek further feedback on this topic in the proposing
release. Specifically, the Board asked commenters to specify why they
believed any transition period was necessary and how long any such
transition period should be.\25\
---------------------------------------------------------------------------

    \24\ Rule 3523(c) provides a time-limited transition period for
an auditor to complete in-progress tax services to a person that
becomes a FROR at the audit client through a hiring, promotion, or
other change in employment event. That transition period is
unaffected by the proposed rules changes.
    \25\ See PCAOB Release 2007-008 (July 24, 2007), at 12.
---------------------------------------------------------------------------

    The majority of commenters on this topic recommended that the Board
provide for a 180-day transition period to allow an accounting firm to
complete covered tax services once the professional engagement period
begins. Most of these commenters stated that, since the Board has
previously determined that a 180-day transition is appropriate when a
person is hired or promoted into a FROR,\26\ the Board should provide
the same transition when an issuer changes its auditor. The commenters
stated that, without a transition period, the person in a FROR could
experience undue hardship because he or she may have to switch tax
preparers in the middle of the personal tax services engagement.
Additionally, some commenters stated that some accounting firms may not
be able to terminate the in-process personal tax services engagements
within a timeframe that would also allow them to submit their proposal
for the new audit engagement. Conversely, some commenters stated that
they believed that the Board should not provide a transition period and
that it is appropriate for the firm to cease the personal tax services
before the professional engagement period begins or that a transition
period should only be available on a case-by-case basis where cessation
of services would cause significant hardship.\27\
---------------------------------------------------------------------------

    \26\ See Rule 3523(c).
    \27\ Another commenter stated that Rule 3523 should be effective
immediately for issuers with fiscal years ending on or after
December 15, 2007, that all personal tax services in process should
be allowed to continue until the filing of the applicable tax
return, and that such services, along with the related fees, should
be disclosed in the issuer's filings with the SEC and documented in
the minutes of meetings of the audit committee.
---------------------------------------------------------------------------

    After considering these comments, the Board does not believe that a
transition period is necessary when a company changes its auditor and
has determined not to amend Rule 3523 to include one. The Board adopted
Rule 3523 because the provision of tax services to a person in a FROR
after the accounting firm is hired as the auditor creates an
unacceptable appearance that the firm lacks independence. While the
Board believed a time-limited exception was warranted to accommodate
persons who, through a hiring or promotion event, abruptly become
covered by the rule, it does not believe that such a transition period
is similarly necessary after an auditor change. In the former
situation, the firm already is the issuer's auditor and has no control
over whether or when the person is promoted or otherwise moved into a
FROR. In contrast, the firm controls whether and when it begins a new
engagement. The Board therefore believes that the firm is able to
conclude, or transition to another provider, any tax services to
persons in FRORs at a new audit client before beginning the
engagement.\28\
---------------------------------------------------------------------------

    \28\ Nothing in Rule 3523 requires a firm to complete or
terminate tax services to persons in FRORs at a potential audit
client before submitting a proposal for a new audit engagement.
Rather, the rule requires the accounting firm to complete or
terminate those services by the beginning of the professional
engagement period.
---------------------------------------------------------------------------

    Some commenters also encouraged the Board to consider providing a
transition period for firms to complete tax services to persons who
become covered by Rule 3523 as a result of a corporate life event, such
as a merger, acquisition, or initial public offering. Commenters
suggested that such corporate life events present conceptually similar
transition issues to those related to the hiring or promotion of a
person into a FROR and that Rule 3523(c) should therefore be expanded
to accommodate them. Commenters also stated that the absence of
transitional relief may cause unnecessary hardship for persons in FRORs
whose tax return preparation work was well underway at the point of the
initial public offering, merger, or acquisition.\29\
---------------------------------------------------------------------------

    \29\ The commenters further stated that, because persons in
FRORs may receive tax services from a number of accounting firms,
the application of the rule to the audit period may unreasonably
restrict a company's ability to either continue or change auditors
after a corporate life event. As discussed above, the Board has
amended the rule to exclude the portion of the audit period that
precedes the professional engagement period.
---------------------------------------------------------------------------

    As discussed above, in the context of an initial public offering,
the rule, as amended, makes clear that tax services provided to a
person in a FROR do not impair independence as long as those tax
services are concluded before the earlier of the date that the firm:
(1) Signed an initial engagement letter or other agreement to perform
an audit pursuant to the standards of the PCAOB, or (2) began
procedures to do so. Auditors should have sufficient time before that
date to conclude any tax services to persons that would be covered by
the rule. Accordingly, the Board does not believe that the recommended
transition period is

necessary in the context of an initial public offering.
    The Board also considered whether a transition period is necessary
to allow a firm to conclude tax services to persons who become covered
by the rule after a merger or acquisition. As discussed above, Rule
3523(c) already provides a transition period for a firm to conclude tax
services to a person who was not in a FROR before a hiring, promotion,
or other change in employment event. If a business combination results
in a change of employer for a person in a FROR--from, for example, the
acquired company to the acquiring company--the existing transition
period in Rule 3523 would apply.\30\ For example, if Company A acquires
Company B, a person who was in a FROR at Company B would experience an
``other change in employment event'' if he or she became an employee of
Company A in a FROR as a result of the acquisition. If such a person
had been receiving tax services from Company A's registered public
accounting firm pursuant to an engagement in process before the
acquisition, the time-limited exception in Rule 3523(c) would
apply.\31\
---------------------------------------------------------------------------

    \30\ See also Staff Questions and Answers, Ethics and
Independence Rules Concerning Independence, Tax Services and
Contingent Fees (April 3, 2007), Question and Answer No. 6, at 4-5.
    \31\ Id.
---------------------------------------------------------------------------

    In the example above, persons in FRORs at Company A would not
experience a change in employment event because they were employed by
Company A both before and after the acquisition, and Rule 3523(c)
would, therefore, not apply. If Company B's auditor became Company A's
auditor after the acquisition (replacing Company A's auditor), Company
B's auditor would have to conclude any tax services to persons in FRORs
(and their immediate family members) at Company A before the start of
the professional engagement period. The Board believes this is
appropriate because, as discussed above, the Board does not believe
that a transition period is necessary to allow a newly engaged auditor
to conclude in-progress tax services to persons in FRORs at the new
audit client. Accordingly, the Board has determined not to expand the
existing transition period in Rule 3523(c).
Effective Date
    Rule 3526 establishes new requirements for registered public
accounting firms. The Board believes it is appropriate to allow a
reasonable period of time for such firms to prepare internal policies
and procedures and train their employees to ensure compliance with
these new requirements. Accordingly, Rule 3526 will become effective,
and ISB No. 1 and the related interpretations superseded, on the later
of September 30, 2008, or 30 days after the date that the SEC approves
the rule.
    The amendment to Rule 3523 would have the effect of making
permanent the Board's delay in implementing the rule as it applies to
tax services provided during the period subject to audit but before the
professional engagement period. Accordingly, no transition period is
necessary, and the amended rule will become effective immediately upon
approval by the SEC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Board consents, the Commission will:
    (a) By order approve such proposed rule change; or
    (b) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the requirements of Title I of the Act.
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/pcaob.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number PCAOB 2008-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number PCAOB 2008-03. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/pcaob/
shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule changes that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the PCAOB. All
comments received will be posted without change; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number PCAOB-2008-03 and should be
submitted on or before August 4, 2008.

    By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15928 Filed 7-11-08; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Notices]
[Page 65203]
[FR Doc No: 2014-25990]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 13702-002]

FFP Missouri 2, LLC; Notice Soliciting Scoping Comments

    Take notice that the following hydroelectric application has been
filed with the Commission and is available for public inspection.
    a. Type of Applications: Original Major License--Existing Dam.
    b. Project No.: 13702-002.
    c. Date filed: November 13, 2013.
    d. Applicant: FFP Missouri 2, LLC.
    e. Name of Project: Grenada Lake Hydroelectric Project.
    f. Location: The proposed project would be located at the U.S. Army
Corps of Engineers' (Corps) existing Grenada Lake dam, on the Yalobusha
River, near the Town of Grenada, Grenada County, Mississippi. The
proposed project would occupy approximately 35.5 acres of federal lands
administered by the Corps.
    g. Filed Pursuant to: Federal Power Act, 16 U.S.C. 791(a)-825(r).
    h. Applicant Contact: Mr. Thomas M. Feldman, Rye Development, LLC,
P.O. Box 390691, Cambridge, MA 02139,<PHONE_NUMBER>.
    i. FERC Contact: Jeanne Edwards at<PHONE_NUMBER>,
<EMAIL_ADDRESS>or Patti Leppert at<PHONE_NUMBER>,
<EMAIL_ADDRESS>    j. Deadline for filing scoping comments: 30 days from the issuance
date of this notice.
    The Commission strongly encourages electronic filing. Please file
scoping comments using the Commission's eFiling system at http://www.ferc.gov/docs-filing/efiling.asp. Commenters can submit brief
comments up to 6,000 characters, without prior registration, using the
eComment system at http://www.ferc.gov/docs-filing/ecomment.asp. You
must include your name and contact information at the end of your
comments. For assistance, please contact FERC Online Support at
<EMAIL_ADDRESS>(866) 208-3676 (toll free), or (202) 502-
8659 (TTY). In lieu of electronic filing, please send a paper copy to:
Secretary, Federal Energy Regulatory Commission, 888 First Street NE.,
Washington, DC 20426. The first page of any filing should include
docket number P-13702-002.
    The Commission's Rules of Practice require all intervenors filing
documents with the Commission to serve a copy of that document on each
person on the official service list for the project. Further, if an
intervenor files comments or documents with the Commission relating to
the merits of an issue that may affect the responsibilities of a
particular resource agency, they must also serve a copy of the document
on that resource agency.
    k. This application is not ready for environmental analysis at this
time.
    l. The proposed Grenada Lake Project would utilize the following
existing Corps' Grenada Lake dam facilities: (1) A 13,900-foot-long,
80-foot-high earth fill embankment dam; (2) a reservoir; and (3) outlet
works consisting of a concrete intake tower; three gated inlets that
combine to a 377.5-foot-long, 17-foot-diameter round concrete outlet
tunnel; and a stilling basin.
    The proposed Grenada Lake Project would consist of the following
new facilities: (1) A 327.5-foot-long, 16-foot-diameter steel liner
installed within the existing concrete outlet tunnel; (2) a 50-foot-
long, 20-foot-high square steel-lined, reinforced concrete gated
bifurcation at the end of the existing concrete outlet tunnel to divide
the flows between the existing stilling basin and new powerhouse; (3) a
260-foot-long, 14-foot-diameter steel penstock from the bifurcation
structure to the forebay; (4) an 86-foot-long, 78-foot-wide, 50-foot-
high forebay; (5) a 120-foot-long, 60-foot-wide, 80-foot-high concrete
powerhouse containing two vertical Kaplan generating units with a total
installed capacity of 9.0 megawatts; (6) a 150-foot-long, 70 foot-wide
tailrace channel; (7) a substation; (8) a 2,650-foot-long transmission
line consisting of a 670-foot-long, 4.160-kilovolt (kV) buried cable
from the powerhouse to the substation, and a 1,980-foot-long, 12.5-kV
overhead line from the substation to an existing utility-owned
distribution line; and (9) appurtenant facilities. The average annual
generation would be 31,000 megawatt-hours.
    m. A copy of the application is available for electronic review at
the Commission in the Public Reference Room, or may be viewed on the
Commission's Web site at http://www.ferc.gov, using the ``eLibrary''
link. Enter the docket number, excluding the last three digits in the
docket number field, to access the document. For assistance, contact
FERC Online Support. A copy is available for inspection and
reproduction at the address in item h above.
    You may register online at http://www.ferc.gov/docs-filing/esubscription.asp to be notified via email of new filings and issuances
related to this or other pending projects. For assistance, contact FERC
Online Support.
    n. Scoping process.
    The Commission staff intends to prepare an environmental assessment
(EA) for the project, in accordance with the National Environmental
Policy Act. The EA will consider both site-specific and cumulative
environmental impacts and reasonable alternatives to the proposed
action.
    The Commission staff does not propose to conduct any on-site
scoping meetings at this time. Instead, staff is soliciting comments,
recommendations, and information on Scoping Document (SD1) issued on
October 27, 2014.
    Copies of the SD1 outlining the subject areas to be addressed in
the EA were distributed to the parties on the Commission's mailing
list. Copies of the SD1 may be viewed on the Web at http://www.ferc.gov, using the ``eLibrary'' link. Enter the docket number,
excluding the last three digits in the docket number field, to access
the document. For assistance, call 1-866-208-3676, or for TTY, (202)
502-8659.

     Dated: October 27, 2014.
Kimberly D. Bose,
Secretary.
[FR Doc. 2014-25990 Filed 10-31-14; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register: July 13, 2010 (Volume 75, Number 133)]
[Notices]
[Page 40004-40005]
[DOCID:fr13jy10-125]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62455; File No. SR-NYSE-2010-51]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Extending the Pilot Program That Offers Liquidity Takers a Reduced
Transaction Fee Structure for Certain Bond Trades Executed on the NYSE
Bonds\SM\ System to December 31, 2010

July 6, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on June 30, 2010, the New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to extend the pilot program that offers
liquidity takers a reduced transaction fee structure for certain bond
trades executed on the NYSE Bonds\SM\ system (``NYSE Bonds'') to
December 31, 2010. The text of the proposed rule change is available at
the Exchange's principal office, http://www.nyse.com, the Commission's
Public Reference Room, and on the Commission's Web site at http://
www.sec.gov.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The New York Stock Exchange LLC (the ``Exchange'' or the ``NYSE'')
proposes to extend the pilot program that offers liquidity takers a
reduced transaction fee structure for certain bond trades executed on
the NYSE Bonds\SM\ system (``NYSE Bonds'') to December 31, 2010.
    This pilot program commenced in January 2008 \3\ and has been
extended several times since that time.\4\ It is scheduled to
terminate, if not extended, on June 30, 2010.
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    \3\ See Securities Exchange Act Release No. 57176 (January 18,
2008), 73 FR 4929 (January 28, 2008) (SR-NYSE-2008-04).
    \4\ See Securities Exchange Act Release Nos. 57823 (May 15,
2008), 73 FR 29804 (May 22, 2008) (SR-NYSE-2008-38), 59178 (December
30, 2008), 74 FR 748 (January 7, 2009) (SR-NYSE-2008-137) and 61201
(December 18, 2009), 74 FR 68651 (December 28, 2009) (SR-NYSE-2009-
127).
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    The pilot program reduces transaction fees charged to liquidity
takers for transactions executed on NYSE Bonds with a staggered
transaction fee schedule based on the number of bonds purchased or sold
in excess of ten (10) bonds. The extended fee filing pilot program
provides for the following transaction fee schedule: (1) When the
liquidity taker purchases or sells from one to ten (10) bonds, the
Exchange will charge an execution fee of $0.50 per bond; (2) when the
liquidity taker purchases or sells from eleven (11) to twenty five (25)
bonds, the Exchange will charge an execution fee of $0.20 per

bond, and (3) when the liquidity taker purchases or sells twenty-six
(26) bonds or more, the Exchange will charge an execution fee of $0.10
per bond.
    For example, if a liquidity taker purchases or sells five (5)
bonds, the Exchange will charge $.50 per bond, or a total of $2.50 for
execution fees. If a liquidity taker purchases or sells twenty (20)
bonds, the Exchange will charge $.20 per bond or a total of $4.00 for
execution fees. If a liquidity taker purchases or sells thirty (30)
bonds, the Exchange will charge $.10 per bond or a total of $3.00 for
execution fees.
    The Exchange will continue to impose a $100 execution fee cap per
transaction.
    The Exchange will seek to file with the Commission, a proposal to
make this liquidity taker program permanent. Accordingly, the Exchange
proposes to extend the pilot program for an additional six (6) months
in order to give the Exchange the necessary time to complete the 19b-4
process regarding the program permanency filing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 \5\ of the Securities Exchange Act of
1934 (the ``Act'') \6\ in general and Section 6(b)(4) of the Act \7\ in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees and other charges among its members
and other persons using its facilities.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78a.
    \7\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes or changes a due, fee, or
other charge imposed on its members by the NYSE.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NYSE-2010-51 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2010-51. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2010-51 and should be
submitted on or before August 3, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-16992 Filed 7-12-10; 8:45 am]
BILLING CODE 8010-01-P


[Federal Register: May 10, 2007 (Volume 72, Number 90)]
[Notices]
[Page 26611]
[DOCID:fr10my07-40]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RP07-439-000]

ANR Pipeline Company; Notice of Annual Report Filing

May 4, 2007.
    Take notice that on May 1, 2007 ANR Pipeline Company (ANR) tendered
for filing its Operational Purchases and Sales of Gas Report for the
twelve month period beginning January 1, 2006 and ending December 31,
2006. ANR states that it is filing this report in compliance with
Section 38 of the General Terms and Conditions of ANR's FERC Gas
Tariff, Second Revised Volume No. 1.
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or protests must be filed on or before the date as indicated
below. Anyone filing an intervention or protest must serve a copy of
that document on the Applicant. Anyone filing an intervention or
protest on or before the intervention or protest date need not serve
motions to intervene or protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov.
 Persons unable to file electronically should submit an

original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the

``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For

TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. Eastern Time May 11, 2007.

Kimberly D. Bose,
Secretary.
[FR Doc. E7-8983 Filed 5-9-07; 8:45 am]

BILLING CODE 6717-01-P