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            Washington, D.C. - Anyone who owns stock in a company or is thinking of buying or selling stock should keep tabs on the organization that works to ensure the securities industry is working within the law, according U.S. Senator Mike Enzi, R-Wyo., senior member of the Senate Banking Committee. The Chairman of the Securities and Exchange Commission briefed the Senate Banking Committee about the U.S. securities market during an annual hearing this morning designed to gauge the current activities and progress of the Securities and Exchange Commission. Chairman Chris Cox and Enzi emphasized the importance of regulation not hindering capital formation in the U.S. and that American markets remain competitive across the globe.

            Enzi’s opening statement from the hearing is included below.

Statement of Senator Mike Enzi

Senate Banking Committee Hearing on:

The State of the Securities Markets

July 31, 2007

            I would like to thank my colleague Chairman Cox for appearing before this committee today. Mr. Chairman, we worked together on several issues during your time in the U.S. House of Representatives and now as the Chairman of the Securities and Exchange Commission. We collaborated on stock option valuation. We were both conferees on the Sarbanes-Oxley Act in 2002. I have always appreciated your perspective on the state of the U.S. and world financial markets, and I look forward to your testimony today.

           Speaking of Sarbanes-Oxley, I noted that last week the Commission voted unanimously in support of Auditing Standard Number Five, the auditor guidance issued by the Public Company Accounting Oversight Board to complement the Commission’s management guidance for Sarbanes-Oxley. I have been engaged in an ongoing dialogue with the Commission on their work, and support their final product. As I have said before, the key to successful implementation and financial controls testing is a risk-based, top-down approach.

            In the early days of Sarbanes-Oxley, auditors could spend hours testing financial controls that posed little or no risk to the company as a whole. These hours translated into skyrocketing costs for public companies and heightened criticism for the way the law was being implemented.

            In order to solve this problem, I urged the Commission to develop management guidance and create a smaller company advisory panel to assist the Commission in developing tailored guidance for small public companies. I also worked with the PCAOB as they refined their guidance and elicited public comments from their small business forums held across the country.

            The result of this effort is clear. The Commission has developed a streamlined process that is scalable for smaller companies, yet still maintains the accountability and transparency required by the Act. I am pleased the Commission spoke with a single voice on this important issue, and look forward to the tangible benefits this guidance will bring to the U.S. companies struggling to comply with the Act. I hope the Commission will continue to monitor the application of their management guidance to anticipate and address issues before they grow into larger problems.

            The Commission has also announced the beginning of another accounting project. I read last week in a Concept Release by the Commission that they are proposing a new method of accounting for U.S. issuers. Now companies can choose to follow U.S. "generally-accepted accounting principles" or "international financial reporting standards" when filing their financial statements with the Commission.

            As an accountant, I understand that implementing this proposal could require a significant amount of time and effort by the Commission. It would require new filing procedures, and change the way company data is analyzed by the Commission and the U.S. public. In a sense, this departure from current practice would change the landscape of our capital markets, and possibly at a high cost.

            However, this change could have very appealing benefits, like attracting foreign companies to the U.S. and making our markets more competitive overseas. There has been an explosion of growth and productivity in the Asian and European capital markets, and it is smart to find new ways to attract that business to our shores. I look forward to hearing more about the Commission’s plans for this project, and their interaction with the FASB and IASB on merging the two accounting methods.

            I would also like to mention the Commission’s work on mutual recognition of foreign financial jurisdictions for the purpose of servicing U.S. investors. Again, there are substantial opportunity to streamline a bureaucratic process to the benefit of the American public, but significant implementation issues must be considered as this proposal is refined. A delicate balance must be reached between investor access and investor protection. I understand the Commission held a roundtable discussion on this issue in June. I would like to learn more about what was discussed and how the SEC plans to work with financial entities in foreign jurisdictions.

           Finally, I have been following the Commission’s investigation on the illegal backdating of stock options. This issue seems to keep getting bigger as the investigation continues. Just last week, the Commission announced new criminal charges in the case.

           I wish to share my support for Chairman Cox and the SEC Enforcement Division for the speed and determination with which they are conducting these investigations. The PCAOB can also play an important role in this issue, as investigations could result in new audit practices for firms auditing public companies.

           Despite the growing amount of evidence about improper accounting and possible fraud within the suspected companies, it is important to understand that stock options remain a legitimate and useful form of compensation. Start-up companies and Fortune 500 companies alike use options plans to motivate rank-and-file employees and attract top talent.

           The Commission has set an ambitious agenda for the coming months. I look forward to working with the Chairman to implement policy that will protect U.S. investors and America’s competitive edge in our growing global economy.

           I would like to thank Chairman Cox again for appearing before the Senate Banking Committee today. I look forward to his testimony.