Subject: File No. S7-16-98
Author:  Nolt, Bob
Date:    8/12/98 8:24 AM
     
     
     
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 5th Street NW
Washington, DC 20549-6009
     
re; SEC's proposed amendment to Rule 102(e) of its Rules of Practice
     
I oppose amendment of this rule for the following reasons:
     
The rule gives the SEC license to disagree with any one of the judgements   
accountants make in the presentation of financial statements and thereby   
to subject them to sanction based solely on that disagreement.  Such an   
environment will restrict accountants in the free exercise of their   
judgement to the detriment of our financial reporting system.
Sanctioning accountants for single acts of simple negligence is   
inconsistent with the purposes of Rule 102(e).  That is, the rule is   
supposed to serve a remedial, not punitive, purpose.  Because a single   
act of simple negligence cannot give rise to a reasonable expectation   
concerning future behavior, such an act cannot pose a threat to the   
Commission's processes.  As a result, Rule 102 (e) provides no basis for   
sanctioning such conduct.
The proposed rule does not directly further the SEC's purpose of ensuring   
accurate and complete disclosure insofar as the proposed rule would only   
require the presence of a substantial risk that a document might be   
materially misstated.  The proposed rule thus adopts a standard that   
could result in an enforcement proceeding against the professional where   
no misstatement has occurred.
The proposal unjustifiably singles out the accounting profession for a   
more stringent standard of care than other professionals who practice   
before the Commission.  In the past, the SEC has declined to bring   
actions against attorneys under Rule 102 (e) where the attorney has not   
already been subject to professional discipline by a state bar or court.   
 In contrast, the SEC routinely initiates actions against accountants who   
have had no prior state board of accountancy or AICPA sanctions.   
 Additionally, attorneys are not generally sanctioned for mere errors in   
judgement.  Thus, the SEC's proposal would exacerbate an already   
unjustifiable discrimination against the accounting profession.