From: dfischer@loeb.com
Sent: Tuesday, January 21, 2003 1:45 PM
To: rule-comments@sec.gov
Subject: S7-02-03

I believe that proposed Rule 10A-3(b)(3) does not sufficiently address 
the statutory requirement for establishing "confidential, anonymous" 
submissions in light of the legislative intent. 

As stated in the proposing release, the legislative intent is to encourage 
reporting of potential improper accounting by freeing employees of the fear 
of management reprisal.  The rule, however, simply requires the audit 
committee to adopt procedures for "receipt, retention, and treatment of 
complaints ... and confidential, anonymous submission by employees" 
concerning accounting improprieties. 

The audit committee could comply with the rule as proposed by simply 
adopting a procedure for receiving anonymous submissions and "treating" 
them by forwarding them to management. 

Cases could arise in which it would be difficult for an employee to provide 
enough information  to be useful without identifying himself.  The rule, as 
proposed, does not require the audit committee to establish procedures for 
preserving an employee's anonymity or confidentiality in such a case; rather, 
it would be within the language of the rule for the committee to deem any 
submission in which the author identifies himself as "waiving" confidentiality 
or anonymity.   

Likewise, the rule does not compel the audit committee to establish procedures 
by which follow-up communications with the author of an anonymous submission 
could be established.  For example, it would be within the language of the 
rule for the committee merely to require investigation of a submission only 
insofar as possible from the information included in the submission.  If the 
submission weren't sufficiently specific to allow an appropriate investigation, 
the committee's procedures could dictate simply that the submission be discarded. 

In some cases, however, the information being provided might be so specific 
that management could identity the employee submitting the information, even 
though not expressly identified.  If the committee's procedure required such 
a submission to be forwarded to management, employees would be inhibited from 
making such submissions, even though nominally "anonymous". 

The rule should be redrafted more explicitly to require that the procedures 
being adopted fulfill the legislative intent.  Accordingly, the rule  should 
require adoption of, for example, "procedures designed to give reasonable 
assurance that complaints about accounting, internal controls, or auditing 
matters can be appropriately investigated and resolved, without directly or 
indirectly revealing to management the identity of any employee submitting 
information with respect thereto". 

David C. Fischer
Loeb & Loeb LLP
345 Park Avenue
New York NY  10154-0037
DDN:  212-407-4827
Fax:  212-407-4990
email: dfischer@loeb.com