Peter D. Frug,, CPA
605 Claymore Dr.
Lafayette, LA 70503
     
August 18, 1998
     
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 5th St., N. W.
Washington DC 20549-6009
     
Re:  File No. S7-16-98
     
Dear Mr. Katz:
     
My views of the SEC s proposed amendment to Rule 102(e) substantially 
mirror those of the AICPA whereby:
     
        Because of the threat to the Commission s processes and our
financial reporting system, we  support the Commission s view . . . that 
disciplinary action under the rule is warranted against the accountant 
who commits an intentional or knowing violation of applicable 
professional standards.   We  also agree that a reckless violation -- 
properly understood as reflecting a conscious and deliberate disregard 
of applicable professional standards -- should be subject to sanction. 
     
        We do not believe, however,  that a single act of simple
negligence . . . should ever constitute  improper professional conduct  for 
purposes of Rule 102(e).   Furthermore,  responsibility for the discipline 
of accountants rests primarily with state boards of accountancy and 
professional organizations,  not within the Commission s regulatory 
oversight authority.
     
          . . . the investing public benefits from accountants who feel free
to exercise their best independent judgment.  The SEC s proposed rule 
gives the SEC license to, with the benefit of hindsight, disagree with any 
one of the myriad of judgments accountants make in preparation of 
financial statements and in the course of an audit, and thereby to subject 
them to sanction based solely on that disagreement.  Such an
environment obviously restricts accountants in the free exercise of their 
judgment 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).  The Commission 
promulgated the rule to protect the integrity of its processes, not to add 
an additional weapon to its enforcement arsenal.  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, or misbehavior, such an act cannot pose a 
threat to the Commission s process.  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 even where no misstatement has occurred.
     
          . . . the SEC s proposal, which the SEC states applies only to
accountants, unjustifiably singles out the accounting profession for a 
more stringent standard of care than other professionals who practice 
before the Commission.
     
          . . . The SEC would be able to utilize a rule which has a
threshold for imposing discipline much lower than the requirement 
imposed by Congress for officers and directors who violate the 
securities laws.
     
 Please work with the AICPA in the cooperative spirit that the two
institutions have demonstrated in the past.  Work to adjust the language 
of the proposed amendment to focus on  protection of the integrity of the 
Commission s process . . . rather than engage in substantive regulation 
of accounting. 
     
Sincerely,
Peter D. Fruge, CPA
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