Adoption of Final Rules on Funding 

DATE: June 14, 2011 
SPEAKER: James R. Doty, Chairman 
EVENT: PCAOB Open Board Meeting 
LOCATION: Washington, DC

The Board's amendments to its funding rules will accomplish two things.

First, they will implement the Dodd-Frank provisions on funding the Board's oversight of auditors of brokers and dealers. This funding mechanism is similar to our existing funding for oversight of audits of issuers, but it uses a measure applicable to broker and dealers.

That is, the rules before the Board today would provide for the portion of its accounting support fee that supports broker-dealer auditor oversight to be paid by brokers and dealers according to their relative tentative net capital.

There are thousands of brokers and dealers registered with FINRA and the SEC. The vast majority of these enterprises are small. This means that if we were to bill all brokers and dealers their relative share, we'd be sending out thousands of bills to thousands of very small brokers. They would be small bills, but they would impose administrative burdens on both the brokers and the PCAOB.

Therefore, as proposed, today's rules would allocate a share of zero – or bill nothing – to any broker or dealer with less than $5 million in tentative net capital. This decision should alleviate the cost and administrative burden on virtually all small broker-dealers. And it will have only a negligible effect on the amounts assessed on larger brokers and dealers, whose fees will be based on a sliding scale according to the relative size of their tentative net capital.

The second thing these amendments will accomplish is to simplify our existing funding mechanism for issuers. Among other things, the amendments will raise the threshold for issuers to be assigned a zero share of our accounting support fee.

For issuers other than investment companies, the threshold will go from $25 million market cap up to $75 million market cap, which should relieve approximately 1,100 small companies from receiving bills from us. They will now pay nothing. For investment companies, the current threshold of $250 million will go up to $500 million.

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