SAN ANTONIO Digital Assurance Certification LLC, an Orlando, Fla.-based dissemination agent in the municipal market for issuers disclosure documents, is no longer affiliated with the Big Four accounting firm Ernst & Young LLP, sources said this week.
Neither Paula Stuart, DACs chief executive officer, nor Ernst & Young officials were available for comment during a two-day period. But sources said Ernst & Young decided to part ways with DAC as part of an ongoing effort to shed some of its non-accounting-related businesses, although the exact legal and financial details were not clear. The split appears to have taken effect on May 1, sources said.
Ernst & Young has been making changes in its businesses since April 2004 when a Securities and Exchange Commission administrative law judge ruled that it had violated auditor independence rules by participating in a joint venture with PeopleSoft Inc. at the same time it was auditing the company. Oracle Corp. has since acquired PeopleSoft.
The SEC prohibited Ernst & Young from accepting new publicly traded U.S. audit clients for six months and required the firm to hire an SEC-approved consultant to monitor its compliance efforts.
The basic structure of DAC has not changed and Stuart remains the firms CEO, but sources said she might be looking for private funding from investors if not now, then soon.
DAC received a so-called no-action letter from the SEC in September 2001 stating that the commission would not take enforcement action against broker-dealers if they relied on DACs database of secondary market disclosure filings to comply with the commissions Rule 15c2-12 on disclosure.
The rule requires issuers, in order for dealers to be able to underwrite their bonds, to contractually agree to file annual financial operating statements and notices of material events, when such events occur, with nationally recognized municipal securities information repositories.
DAC is one of several organizations that collect secondary market disclosure documents from issuers and send them to the NRMSIRs. DAC also posts the documents on its Web site, www.dacbond.com, formerly www.dac-ey.com.
During the past year, dissemination agents have worried about competition from the Muni Councils Central Post Office disclosure facility, which is run by the Municipal Advisory Council of Texas in Austin. The Muni Council is a group of about 20 municipal market groups that set up the CPO to improve secondary market disclosure.
The CPO is designed to serve as a one-stop place for issuers to file their disclosure documents. It collects documents from issuers and automatically sends them to the NRMSIRs. The CPO also is designed to eliminate the inconsistencies that have occurred in the filings received by the repositories.
DAC generally disseminates disclosure documents to the NRMSIRs directly, rather than through the CPO. But some Muni Council members have been pushing all issuers to use the CPO, which is free.
The Texas MAC has stressed that the CPO is not trying to compete with any of the dissemination agents and that its mission is merely to simplify the process of filing disclosure documents for issuers.
DAC has always contended that it is more than a dissemination agent. It describes itself as a firm that specializes in investor relations programs and compliance reporting for the municipal securities industry. It offers issuers the chance to hold teleconferences with investors, for example.
