Circular D4/356/ Procedure for the Approval of Auditors of Stockbrokerage Companies

COMMISSION BANCAIRE ET FINANCIERE Prudential supervision of investment companies Brussels, 28 March 1997. D4/356 LETTER CIRCULAR TO THE AUDITORS OF STOCKBROKERAGE COMPANIES

Dear Auditor,

The Law of 6 April 1995 introduced significant modifications to the regime of audit supervision of stockbrokerage companies. These mainly concern the obligation placed on stockbrokerage companies to appoint an auditor approved by the Banking and Financial Commission in accordance with Article 52 of the Law of 22 March 1993, which implies greater collaboration of these auditors in the prudential supervision exercised by the Banking and Financial Commission and, consequently, greater availability.

In order to allow the auditors currently in function at stockbrokerage companies to prepare for this approval, the law has organized a transitional period of three years. Indeed, the appointment by stockbrokerage companies of an approved auditor must take place no later than the end of the mandates in office on 1 January 1999.

Given these prospects, it seems useful to me to provide the following indications to the attention of future candidates for approval.

1. Currently, 53 auditors are approved by the Banking and Financial Commission. Nine of these auditors were approved in February 1997 following a procedure organized to meet the needs of the approved audit sector in the credit institutions sector.

A new procedure, which will address specifically the auditors currently serving stockbrokerage companies, will take place during the year 1998, in order to allow them to make the best use of the transitional period.

2. Any procedure for the approval of auditors aims to achieve a number of auditors determined at the beginning of the approval procedure. To the extent that this number is lower than the number of candidates, the approval procedure takes de facto the form of a competition.

3. The regulation on the approval of auditors and audit firms adopted by the Banking and Financial Commission was approved by Royal Decree of 4 June 1993 and modified by the decrees of 1 February 1994 and 21 May 1996 of the Banking and Financial Commission. This regulation specifies in Article 1 the conditions that must be met to be approved by the Banking and Financial Commission.

Among these, it is necessary to highlight in particular the conditions concerning the candidate's experience and aptitude as well as those regarding organization:

• candidates must demonstrate experience in the organization and execution of audit missions for companies and that they are able to perform with independence and competence the missions of auditor-auditor at credit institutions and investment companies;
• they must have adequate organization to exercise functions at credit institutions and investment companies.

It is therefore recommended to auditors, candidates for approval, who do not currently meet one or other of these conditions, to take any measures now to familiarize themselves with the areas in which they have a lesser degree of knowledge, particularly those related to the sector of credit institutions, and/or to adapt their organization so that it is able to respond to the imperatives of the function of approved auditor, a function that is likely to require significant availability at times that cannot always be determined in advance.

My collaborators (Messrs. G. Van Parijs and Ph. de Harlez) remain at your disposal to provide any further information that you may deem useful regarding the upcoming approval procedures, and I strongly encourage you to contact them in the framework of preparing an application file.

In the meantime, I remain,

Auditor, the expression of my distinguished sentiments.