SEC's Cox: Unlikely to Ditch Mark-to-Market Rules

The US Securities and Exchange Commission will hold a roundtable on the issue of fair-value accounting rules in the next few weeks but will stop short of getting rid of mark-to-market valuations, SEC chairman Christopher Cox told CNBC Wednesday.

The group will focus on current regulations governing the valuation of illiquid instruments, which have suffered because of insufficient pricing information during the credit crisis, Cox said, speaking on the fringes of an international meeting of regulators in Paris.

“We’ve learned a lot that we didn’t know,” Cox said. “But no one is seriously proposing getting rid of fair-value accounting.”

Current mark-to-market models - which call for firms to price assets versus the market on a daily basis - provide great benefits to some of the alternatives, Cox said.

The aim of the discussions is to provide the market with better guidance and a framework to keep investors reliably informed, he added.

The mark-to-market accounting rule has drawn heavy criticism due to its contribution to billions worth of dollar writedowns during the credit crisis.

The issue of international accounting standards has topped this year’s meeting of the International Organization of Securities Commissioners, with the group expected to take further steps in enforcing the development of a truly international financial accounting standard (IFRS) soon.

In his role as Auditing Task Force Chairman, Cox has called for the formation of a monitoring body to oversee IFRS implementation in the US. He told CNBC that the International Organization of Securities Commissioners has supported the governance proposal and it will very likely be enacted.

The move follows last year’s SEC rule-change allowing foreign companies with US listing to use IFRS. The next step is permission for some US companies themselves to report using the standards, Cox said.

“The US will undoubtedly become a major participant using IFRS some day,” Cox said. “What the commission will be considering this year will be whether there are any circumstances under which US filers – not just foreign filers – can use IFRS.”

Cox said he couldn’t predict what commissioners would do next, but in the long-term the US would undoubtedly become a major participant using IFRS, something that would enhance investor confidence in market processes, but full implementation was a matter of years rather than months.

“Independence is an important part of standard setting and we have to strike a balance as these governance reforms are considered,” Cox said.