VIA FACSIMILE

The Honorable Mike Oxley
Conference Chair
U.S. House of Representatives
Washington, DC 20515

The Honorable Paul Sarbanes
Conference Vice Chair
U.S. Senate
Washington, DC 20510

RE: H.R. 3763, Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002

Dear Conference Leaders:

On behalf of AeA, I would like to comment on legislation currently pending in the Conference Committee on H.R. 3763, the "Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002."

The high-tech companies AeA represents support efforts to restore investor confidence in corporate America and believe this legislation will make significant progress towards achieving that goal. Importantly, however, AeA wishes to offer our comments for improvements to this legislation that can be reached while the measure is in conference.

As you may know, AeA is the nation's largest high-tech trade association. AeA has more than 3,500 member companies that span the high-technology spectrum, from software, semiconductors and computers to Internet technology, advanced electronics and telecommunications systems and services. With 19 U.S. offices and offices in Brussels and Beijing, AeA offers a unique global policy grassroots capability. AeA has been the accepted voice of the U.S. technology community for nearly 60 years.

AeA urges the Conference to consider these serious technical concerns about the Senate-passed bill:

• The criminal standard established in Sec. 906, "Corporate Responsibility for Financial Reports:" The criminal penalty standard established in this section creates a confusing and inconsistent legal standard of "recklessly and knowingly." This standard is not found in any other definition of case law or statute relating to securities fraud. Although AeA supports the important concept of CEO responsibility for financial reports, AeA believes this provision should be modified to match the current criminal fraud standard. Such modification would not lessen the strength of this provision, but would bring consistency to the legal process surrounding securities fraud.

• Inclusion of chairman in certification requirements established in Sec. 906, "Corporate Responsibility for Financial Reports:" AeA objects to the inclusion of the chairman of the board among those who must certify periodic financial reports. The chairman’s role in a company is, on occasion, part-time, and chairmen often serve in the capacity of an outside director. By including the chairman in the certification requirements, the provision creates an inherent conflict between the roles of the chief executive officer, who manages the day-to-day running of the company, and that of the chairman of the board who serves in an oversight capacity.

• Effective date of prohibition on personal loans to executives established in Sec. 402, "Enhanced Conflict of Interest Provisions:" Since this section is silent as to loans that are already in effect, AeA is concerned about the impact of this provision on loan agreements that are already in effect, and suggests an appropriate safe-harbor for pre-existing loans.

• Whistle-blower provisions established in Sec. 806, "Protection for Employees of Publicly Traded Companies who Provide Evidence of Fraud:" This section would create a new civil cause of action and may result in employment lawyers counseling their clients to make spurious allegations of fraud to regulators to trigger the benefits of this section. AeA is concerned that this new whistle-blower provision could be used by employees to protect themselves in a manner inconsistent with the intent behind this new law. If this section is to be retained, it should include among its remedies only administrative resolution within the Department of Labor, which will provide ample protection for employees.

• Statute of limitations established in Sec. 804, "Statute of Limitations for Securities Fraud:" A change from the current 1-year/3-year statute of limitation and repose to 2-year/5-year statute of limitation and repose unnecessarily expands corporate exposure to liability while providing no meaningful additional measure of protection to investors. No private right of action under the securities laws now has limitations or repose periods of 2 years and 5 years. Moreover, recent experience with the application of the federal securities laws after the Private Securities Litigation Reform Act yields no reason to conclude that the existing 1-year/3-year structure in any way frustrates the purposes of the securities laws or the ability of affected parties to bring legitimate suits. The current 1-year/3-year structure should be maintained.

Thank you for your consideration of our views on this important legislation. AeA encourages the Conference to carefully conclude its consideration of H.R. 3763, and in so doing we hope you will address the above concerns of the high-tech industry.

Sincerely,

(Signed)
William T. Archey
President and CEO