VideoProviding a satisfying ending for an otherwise dismal week for PricewaterhouseCoopers, Donald Nicolaisen, a PwC senior partner, has been picked as the Securities and Exchange Commission's chief accountant.
Earlier this week, the SEC separately barred two former PwC audit partners, Richard Scalzo and Warren Martin, from practicing as accountants.
Landing a partner in the important SEC chief accountant slot is sure to dispel some of the glumness at the giant accounting firm. For his part, Nicolaisen will take charge of the SEC's accounting policy programs. He'll also lead the commission's work with national and international standard-setters on accounting and auditing issues, the SEC said. Those efforts including international convergence and efforts to adopt principles-based accounting standards, the SEC.
Nicolaisen will also work closely with the Public Company Accounting Oversight Board (PCAOB). His counterpart at the oversight board, Douglas Carmichael, has been called a stern critic of the auditing profession.
Nicolaisen joined PwC's predecessor, Price Waterhouse in 1967, and between 1988 and 1994 led the firm's national office for accounting and SEC services.
During that time, he was also a member of the Emerging Issues Task Force of the Financial Accounting Standards Board. He later chaired PW's financial services practice for broker-dealers, investment banking, mutual funds, banking, insurance, and real estate.
"Throughout his distinguished career, Don has been a powerful agent of change whose leadership has helped identify, build consensus around and accomplish strategic objectives toward high quality corporate financial reporting and disclosure," said SEC chairman William Donaldson, in a statement.
Change Comes to the 500 Club
When Medco Health Solutions is spun off from Merck next week, the pharmacy benefits management company will not only become an independent company. It will instantly join the exclusive Standard & Poor's 500 club.
On Wednesday, the rating agency said Medco will replace McDermott International because of the slippage of the oil-services firm's market capitalization, which has dipped below $300 million.
S&P's decision probably didn't come as a shock to Nicholas Gulden and Steven Kreichman, Citigroup traders who track index changes. They recently published a report predicting that nine U.S. companies valued at less than $1 billion would be evicted from the widely-followed index, singling out McDermott as the least-valuable S&P 500 member.
Now, that's not exactly a regular event at S&P. The rating agency has turned over its index just seven times so far this year. On average, S&P changes companies in the index 25 times per year.
In contrast, the biggest massacre took place in December 2000, when seven companies disappeared from the index in two days.
How important is it to be included in the S&P 500 index? Each time a company is added, the managers of S&P 500 mutual and institutional funds must buy the stocks of the new members and sell the shares of the dumped companies. There is currently about $900 billion in S&P 500 mutual funds.
Another $1 trillion or so is invested in mutual funds that try to track the movement of the index and are influenced by changes. But those funds are not required to buy or sell shares as a result, according to the Investment Company Institute, a trade association.
Other top candidates to join the S&P 500 include biotech company Gilead Sciences Inc., and M&T Bank Corp., the biggest members of the S&P MidCap 400 Index, a benchmark for companies less valuable than those in the S&P 500, according to Citigroup. The two companies have market values of $12.5 billion and $10.3 billion, respectively, which would place them among the top 200 of the S&P 500.
Other possibilities include software developer BEA Systems Inc. and finance company CIT Group Inc., according to Leo Guzman, president of Guzman & Co., which tracks the S&P 500 closely, in a published report. They are each valued at about $5 billion and aren't in any of S&P's benchmark indexes.
The other S&P 500 companies valued at less than $1 billion are Allegheny Technologies, Goodyear Tire & Rubber Co., Tupperware Corp., CMS Energy Corp., Thomas & Betts Corp., Power-One Inc., Parametric Technology Corp., and Visteon Corp.
SEC Launches Probes
The SEC is investigating Cinergy, the Cincinnati-based power company, and New York City-based insurer MetLife, according to the companies.
Cinergy said it received subpoenas from two U.S. securities regulators seeking information about trading activity with one of its counterparties.
The company said in the second quarter it received initial and follow-up subpoenas from the SEC. In July, Cinergy received a subpoena from the Commodity Futures Trading Commission (CFTC).
"The CFTC request seeks certain information regarding our trading activities, including price reporting to energy industry publications," the company stated in its quarterly filing. "The CFTC seeks particular information concerning these matters for the period May 2000 through January 2001 as to one of Cinergy's employees."
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