WASHINGTON — Securities and Exchange Commission Chairman Arthur Levitt stood firm during a Senate Banking subcommittee hearing Thursday on his agency’s proposal to eliminate conflicts of interest by auditors.

The proposal would bar banks and other companies from using the same firm as auditors and consultants, and prohibit banks from hiring the same firm to conduct internal and external audits.

Despite many comment letters criticizing the proposal, Mr. Levitt said the plan is widely recognized as sensible and appropriate. In testimony before the subcommittee on securities, Mr. Levitt said the agency has attempted to reach a compromise with the top auditing firms, but that some are not willing to deal.

“Instead of coming to the table to craft flexible, long-term rules that will serve America’s markets and investors, some have chosen to form alliances and fight, showing an apparent willingness to reap the benefits of this public-mandated franchise, but largely ignore the premise of its responsibilities,” Mr. Levitt said.

“Some seem content to construct arguments that hide behind the dazzle of the so-called New Economy, but ignore the very principles that make our markets the most sound and respected in the world,” he said.

Senate Banking Committee Chairman Phil Gramm responded that there should be heavy burden of proof before regulators take steps that could “dramatically change the way we do business in America.”

There has to be “hard evidence that there’s a problem, and that this dismemberment is going to solve the problem,” said Sen. Gramm.

Mr. Levitt then offered the Texas Republican a confidential briefing for all committee members about auditing cases under investigation by the SEC. Subcommittee chairman Rod Grams, R-Minn., said that he plans to schedule such a meeting for next week.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.