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Sarbanes-Oxley Act of 2002


Public Law 107-204
107th Congress

                                 An Act


 
   To protect investors by improving the accuracy and reliability of 
  corporate disclosures made pursuant to the securities laws, and for 
         other purposes. <<NOTE: July 30, 2002 -  [H.R. 3763]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Sarbanes-Oxley Act of 
2002. Corporate responsibility.>> assembled,

SECTION 1. SHORT <<NOTE: 15 USC 7201 note.>> TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Sarbanes-Oxley Act 
of 2002''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:


Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Commission rules and enforcement.

           TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD


Sec. 101. Establishment; administrative provisions.
Sec. 102. Registration with the Board.
Sec. 103. Auditing, quality control, and independence standards and 
           rules.
Sec. 104. Inspections of registered public accounting firms.
Sec. 105. Investigations and disciplinary proceedings.
Sec. 106. Foreign public accounting firms.
Sec. 107. Commission oversight of the Board.
Sec. 108. Accounting standards.
Sec. 109. Funding.

                     TITLE II--AUDITOR INDEPENDENCE


Sec. 201. Services outside the scope of practice of auditors.
Sec. 202. Preapproval requirements.
Sec. 203. Audit partner rotation.
Sec. 204. Auditor reports to audit committees.
Sec. 205. Conforming amendments.
Sec. 206. Conflicts of interest.
Sec. 207. Study of mandatory rotation of registered public accounting 
           firms.
Sec. 208. Commission authority.
Sec. 209. Considerations by appropriate State regulatory authorities.

                   TITLE III--CORPORATE RESPONSIBILITY


Sec. 301. Public company audit committees.
Sec. 302. Corporate responsibility for financial reports.
Sec. 303. Improper influence on conduct of audits.
Sec. 304. Forfeiture of certain bonuses and profits.
Sec. 305. Officer and director bars and penalties.
Sec. 306. Insider trades during pension fund blackout periods.
Sec. 307. Rules of professional responsibility for attorneys.
Sec. 308. Fair funds for investors.


                TITLE IV--ENHANCED FINANCIAL DISCLOSURES


Sec. 401. Disclosures in periodic reports.
Sec. 402. Enhanced conflict of interest provisions.
Sec. 403. Disclosures of transactions involving management and principal 
           stockholders.


[[Page 116 STAT. 746]]


Sec. 404. Management assessment of internal controls.
Sec. 405. Exemption.
Sec. 406. Code of ethics for senior financial officers.
Sec. 407. Disclosure of audit committee financial expert.
Sec. 408. Enhanced review of periodic disclosures by issuers.
Sec. 409. Real time issuer disclosures.


                 TITLE V--ANALYST CONFLICTS OF INTEREST


Sec. 501. Treatment of securities analysts by registered securities 
           associations and national securities exchanges.


              TITLE VI--COMMISSION RESOURCES AND AUTHORITY

Sec. 601. Authorization of appropriations.
Sec. 602. Appearance and practice before the Commission.
Sec. 603. Federal court authority to impose penny stock bars.
Sec. 604. Qualifications of associated persons of brokers and dealers.

                     TITLE VII--STUDIES AND REPORTS


Sec. 701. GAO study and report regarding consolidation of public 
           accounting firms.
Sec. 702. Commission study and report regarding credit rating agencies.
Sec. 703. Study and report on violators and violations
Sec. 704. Study of enforcement actions.
Sec. 705. Study of investment banks.


         TITLE VIII--CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY


Sec. 801. Short title.
Sec. 802. Criminal penalties for altering documents.
Sec. 803. Debts nondischargeable if incurred in violation of securities 
           fraud laws.
Sec. 804. Statute of limitations for securities fraud.
Sec. 805. Review of Federal Sentencing Guidelines for obstruction of 
           justice and extensive criminal fraud.
Sec. 806. Protection for employees of publicly traded companies who 
           provide evidence of fraud.
Sec. 807. Criminal penalties for defrauding shareholders of publicly 
           traded companies.


            TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS


Sec. 901. Short title.
Sec. 902. Attempts and conspiracies to commit criminal fraud offenses.
Sec. 903. Criminal penalties for mail and wire fraud.
Sec. 904. Criminal penalties for violations of the Employee Retirement 
           Income Security Act of 1974.
Sec. 905. Amendment to sentencing guidelines relating to certain white-
           collar offenses.
Sec. 906. Corporate responsibility for financial reports.


                     TITLE X--CORPORATE TAX RETURNS


Sec. 1001. Sense of the Senate regarding the signing of corporate tax 
           returns by chief executive officers.


              TITLE XI--CORPORATE FRAUD AND ACCOUNTABILITY


Sec. 1101. Short title.
Sec. 1102. Tampering with a record or otherwise impeding an official 
           proceeding.
Sec. 1103. Temporary freeze authority for the Securities and Exchange 
           Commission.
Sec. 1104. Amendment to the Federal Sentencing Guidelines.
Sec. 1105. Authority of the Commission to prohibit persons from serving 
           as officers or directors.
Sec. 1106. Increased criminal penalties under Securities Exchange Act of 
           1934.
Sec. 1107. Retaliation <<NOTE: 15 USC 7201.>> against informants.


SEC. 2. <<NOTE: 15 USC 7201.>> DEFINITIONS.

    (a) In General.--In this Act, the following definitions shall apply:
            (1) Appropriate state regulatory authority.--The term 
        ``appropriate State regulatory authority'' means the State 
        agency or other authority responsible for the licensure or other 
        regulation of the practice of accounting in the State or States

[[Page 116 STAT. 747]]

        having jurisdiction over a registered public accounting firm or 
        associated person thereof, with respect to the matter in 
        question.
            (2) Audit.--The term ``audit'' means an examination of the 
        financial statements of any issuer by an independent public 
        accounting firm in accordance with the rules of the Board or the 
        Commission (or, for the period preceding the adoption of 
        applicable rules of the Board under section 103, in accordance 
        with then-applicable generally accepted auditing and related 
        standards for such purposes), for the purpose of expressing an 
        opinion on such statements.
            (3) Audit committee.--The term ``audit committee'' means--
                    (A) a committee (or equivalent body) established by 
                and amongst the board of directors of an issuer for the 
                purpose of overseeing the accounting and financial 
                reporting processes of the issuer and audits of the 
                financial statements of the issuer; and
                    (B) if no such committee exists with respect to an 
                issuer, the entire board of directors of the issuer.
            (4) Audit report.--The term ``audit report'' means a 
        document or other record--
                    (A) prepared following an audit performed for 
                purposes of compliance by an issuer with the 
                requirements of the securities laws; and
                    (B) in which a public accounting firm either--
                          (i) sets forth the opinion of that firm 
                      regarding a financial statement, report, or other 
                      document; or
                          (ii) asserts that no such opinion can be 
                      expressed.
            (5) Board.--The term ``Board'' means the Public Company 
        Accounting Oversight Board established under section 101.
            (6) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (7) Issuer.--The term ``issuer'' means an issuer (as defined 
        in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 
        78c)), the securities of which are registered under section 12 
        of that Act (15 U.S.C. 78l), or that is required to file reports 
        under section 15(d) (15 U.S.C. 78o(d)), or that files or has 
        filed a registration statement that has not yet become effective 
        under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and 
        that it has not withdrawn.
            (8) Non-audit services.--The term ``non-audit services'' 
        means any professional services provided to an issuer by a 
        registered public accounting firm, other than those provided to 
        an issuer in connection with an audit or a review of the 
        financial statements of an issuer.
            (9) Person associated with a public accounting firm.--
                    (A) In general.--The terms ``person associated with 
                a public accounting firm'' (or with a ``registered 
                public accounting firm'') and ``associated person of a 
                public accounting firm'' (or of a ``registered public 
                accounting firm'') mean any individual proprietor, 
                partner, shareholder, principal, accountant, or other 
                professional employee of a public accounting firm, or 
                any other independent contractor or entity that, in 
                connection with the preparation or issuance of any audit 
                report--

[[Page 116 STAT. 748]]

                          (i) shares in the profits of, or receives 
                      compensation in any other form from, that firm; or
                          (ii) participates as agent or otherwise on 
                      behalf of such accounting firm in any activity of 
                      that firm.
                    (B) Exemption authority.--The Board may, by rule, 
                exempt persons engaged only in ministerial tasks from 
                the definition in subparagraph (A), to the extent that 
                the Board determines that any such exemption is 
                consistent with the purposes of this Act, the public 
                interest, or the protection of investors.
            (10) Professional standards.--The term ``professional 
        standards'' means--
                    (A) accounting principles that are--
                          (i) established by the standard setting body 
                      described in section 19(b) of the Securities Act 
                      of 1933, as amended by this Act, or prescribed by 
                      the Commission under section 19(a) of that Act (15 
                      U.S.C. 17a(s)) or section 13(b) of the Securities 
                      Exchange Act of 1934 (15 U.S.C. 78a(m)); and
                          (ii) relevant to audit reports for particular 
                      issuers, or dealt with in the quality control 
                      system of a particular registered public 
                      accounting firm; and
                    (B) auditing standards, standards for attestation 
                engagements, quality control policies and procedures, 
                ethical and competency standards, and independence 
                standards (including rules implementing title II) that 
                the Board or the Commission determines--
                          (i) relate to the preparation or issuance of 
                      audit reports for issuers; and
                          (ii) are established or adopted by the Board 
                      under section 103(a), or are promulgated as rules 
                      of the Commission.
            (11) Public accounting firm.--The term ``public accounting 
        firm'' means--
                    (A) a proprietorship, partnership, incorporated 
                association, corporation, limited liability company, 
                limited liability partnership, or other legal entity 
                that is engaged in the practice of public accounting or 
                preparing or issuing audit reports; and
                    (B) to the extent so designated by the rules of the 
                Board, any associated person of any entity described in 
                subparagraph (A).
            (12) Registered public accounting firm.--The term 
        ``registered public accounting firm'' means a public accounting 
        firm registered with the Board in accordance with this Act.
            (13) Rules of the board.--The term ``rules of the Board'' 
        means the bylaws and rules of the Board (as submitted to, and 
        approved, modified, or amended by the Commission, in accordance 
        with section 107), and those stated policies, practices, and 
        interpretations of the Board that the Commission, by rule, may 
        deem to be rules of the Board, as necessary or appropriate in 
        the public interest or for the protection of investors.
            (14) Security.--The term ``security'' has the same meaning 
        as in section 3(a) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a)).

[[Page 116 STAT. 749]]

            (15) Securities laws.--The term ``securities laws'' means 
        the provisions of law referred to in section 3(a)(47) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), as 
        amended by this Act, and includes the rules, regulations, and 
        orders issued by the Commission thereunder.
            (16) State.--The term ``State'' means any State of the 
        United States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, or any other territory or possession of the United 
        States.

    (b) Conforming Amendment.--Section 3(a)(47) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) is amended by inserting 
``the Sarbanes-Oxley Act of 2002,'' before ``the Public''.

SEC. 3. <<NOTE: 15 USC 7202.>> COMMISSION RULES AND ENFORCEMENT.

    (a) Regulatory Action.--The Commission shall promulgate such rules 
and regulations, as may be necessary or appropriate in the public 
interest or for the protection of investors, and in furtherance of this 
Act.
    (b) Enforcement.--
            (1) In general.--A violation by any person of this Act, any 
        rule or regulation of the Commission issued under this Act, or 
        any rule of the Board shall be treated for all purposes in the 
        same manner as a violation of the Securities Exchange Act of 
        1934 (15 U.S.C. 78a et seq.) or the rules and regulations issued 
        thereunder, consistent with the provisions of this Act, and any 
        such person shall be subject to the same penalties, and to the 
        same extent, as for a violation of that Act or such rules or 
        regulations.
            (2) Investigations, injunctions, and prosecution of 
        offenses.--Section 21 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78u) is amended--
                    (A) in subsection (a)(1), by inserting ``the rules 
                of the Public Company Accounting Oversight Board, of 
                which such person is a registered public accounting firm 
                or a person associated with such a firm,'' after ``is a 
                participant,'';
                    (B) in subsection (d)(1), by inserting ``the rules 
                of the Public Company Accounting Oversight Board, of 
                which such person is a registered public accounting firm 
                or a person associated with such a firm,'' after ``is a 
                participant,'';
                    (C) in subsection (e), by inserting ``the rules of 
                the Public Company Accounting Oversight Board, of which 
                such person is a registered public accounting firm or a 
                person associated with such a firm,'' after ``is a 
                participant,''; and
                    (D) in subsection (f), by inserting ``or the Public 
                Company Accounting Oversight Board'' after ``self-
                regulatory organization'' each place that term appears.
            (3) Cease-and-desist proceedings.--Section 21C(c)(2) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is 
        amended by inserting ``registered public accounting firm (as 
        defined in section 2 of the Sarbanes-Oxley Act of 2002),'' after 
        ``government securities dealer,''.
            (4) Enforcement by federal banking agencies.--Section 12(i) 
        of the Securities Exchange Act of 1934 (15 U.S.C. 78l(i)) is 
        amended by--
                    (A) striking ``sections 12,'' each place it appears 
                and inserting ``sections 10A(m), 12,''; and

[[Page 116 STAT. 750]]

                    (B) striking ``and 16,'' each place it appears and 
                inserting ``and 16 of this Act, and sections 302, 303, 
                304, 306, 401(b), 404, 406, and 407 of the Sarbanes-
                Oxley Act of 2002,''.

    (c) Effect on Commission Authority.--Nothing in this Act or the 
rules of the Board shall be construed to impair or limit--
            (1) the authority of the Commission to regulate the 
        accounting profession, accounting firms, or persons associated 
        with such firms for purposes of enforcement of the securities 
        laws;
            (2) the authority of the Commission to set standards for 
        accounting or auditing practices or auditor independence, 
        derived from other provisions of the securities laws or the 
        rules or regulations thereunder, for purposes of the preparation 
        and issuance of any audit report, or otherwise under applicable 
        law; or
            (3) the ability of the Commission to take, on the initiative 
        of the Commission, legal, administrative, or disciplinary action 
        against any registered public accounting firm or any associated 
        person thereof.

           TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

SEC. 101. <<NOTE: 15 USC 7211.>> ESTABLISHMENT; ADMINISTRATIVE 
            PROVISIONS.

    (a) Establishment of Board.--There is established the Public Company 
Accounting Oversight Board, to oversee the audit of public companies 
that are subject to the securities laws, and related matters, in order 
to protect the interests of investors and further the public interest in 
the preparation of informative, accurate, and independent audit reports 
for companies the securities of which are sold to, and held by and for, 
public investors. The Board shall be a body corporate, operate as a 
nonprofit corporation, and have succession until dissolved by an Act of 
Congress.
    (b) Status.--The Board shall not be an agency or establishment of 
the United States Government, and, except as otherwise provided in this 
Act, shall be subject to, and have all the powers conferred upon a 
nonprofit corporation by, the District of Columbia Nonprofit Corporation 
Act. No member or person employed by, or agent for, the Board shall be 
deemed to be an officer or employee of or agent for the Federal 
Government by reason of such service.
    (c) Duties of the Board.--The Board shall, subject to action by the 
Commission under section 107, and once a determination is made by the 
Commission under subsection (d) of this section--
            (1) register public accounting firms that prepare audit 
        reports for issuers, in accordance with section 102;
            (2) establish or adopt, or both, by rule, auditing, quality 
        control, ethics, independence, and other standards relating to 
        the preparation of audit reports for issuers, in accordance with 
        section 103;
            (3) conduct inspections of registered public accounting 
        firms, in accordance with section 104 and the rules of the 
        Board;
            (4) conduct investigations and disciplinary proceedings 
        concerning, and impose appropriate sanctions where justified 
        upon,

[[Page 116 STAT. 751]]

        registered public accounting firms and associated persons of 
        such firms, in accordance with section 105;
            (5) perform such other duties or functions as the Board (or 
        the Commission, by rule or order) determines are necessary or 
        appropriate to promote high professional standards among, and 
        improve the quality of audit services offered by, registered 
        public accounting firms and associated persons thereof, or 
        otherwise to carry out this Act, in order to protect investors, 
        or to further the public interest;
            (6) enforce compliance with this Act, the rules of the 
        Board, professional standards, and the securities laws relating 
        to the preparation and issuance of audit reports and the 
        obligations and liabilities of accountants with respect thereto, 
        by registered public accounting firms and associated persons 
        thereof; and
            (7) set the budget and manage the operations of the Board 
        and the staff of the Board.

    (d) Commission Determination.--The members of the Board shall take 
such action (including hiring of staff, proposal of rules, and adoption 
of initial and transitional auditing and other professional standards) 
as may be necessary or appropriate to enable the Commission to 
determine, not later than 270 days after the date of enactment of this 
Act, that the Board is so organized and has the capacity to carry out 
the requirements of this title, and to enforce compliance with this 
title by registered public accounting firms and associated persons 
thereof. The Commission shall be responsible, prior to the appointment 
of the Board, for the planning for the establishment and administrative 
transition to the Board's operation.
    (e) Board Membership.--
            (1) Composition.--The Board shall have 5 members, appointed 
        from among prominent individuals of integrity and reputation who 
        have a demonstrated commitment to the interests of investors and 
        the public, and an understanding of the responsibilities for and 
        nature of the financial disclosures required of issuers under 
        the securities laws and the obligations of accountants with 
        respect to the preparation and issuance of audit reports with 
        respect to such disclosures.
            (2) Limitation.--Two members, and only 2 members, of the 
        Board shall be or have been certified public accountants 
        pursuant to the laws of 1 or more States, provided that, if 1 of 
        those 2 members is the chairperson, he or she may not have been 
        a practicing certified public accountant for at least 5 years 
        prior to his or her appointment to the Board.
            (3) Full-time independent service.--Each member of the Board 
        shall serve on a full-time basis, and may not, concurrent with 
        service on the Board, be employed by any other person or engage 
        in any other professional or business activity. No member of the 
        Board may share in any of the profits of, or receive payments 
        from, a public accounting firm (or any other person, as 
        determined by rule of the Commission), other than fixed 
        continuing payments, subject to such conditions as the 
        Commission may impose, under standard arrangements for the 
        retirement of members of public accounting firms.
            (4) Appointment of board members.--
                    (A) Initial board.--Not <<NOTE: Deadline.>> later 
                than 90 days after the date of enactment of this Act, 
                the Commission, after consultation with the Chairman of 
                the Board of Governors

[[Page 116 STAT. 752]]

                of the Federal Reserve System and the Secretary of the 
                Treasury, shall appoint the chairperson and other 
                initial members of the Board, and shall designate a term 
                of service for each.
                    (B) Vacancies.--A vacancy on the Board shall not 
                affect the powers of the Board, but shall be filled in 
                the same manner as provided for appointments under this 
                section.
            (5) Term of service.--
                    (A) In general.--The term of service of each Board 
                member shall be 5 years, and until a successor is 
                appointed, except that--
                          (i) the terms of office of the initial Board 
                      members (other than the chairperson) shall expire 
                      in annual increments, 1 on each of the first 4 
                      anniversaries of the initial date of appointment; 
                      and
                          (ii) any Board member appointed to fill a 
                      vacancy occurring before the expiration of the 
                      term for which the predecessor was appointed shall 
                      be appointed only for the remainder of that term.
                    (B) Term limitation.--No person may serve as a 
                member of the Board, or as chairperson of the Board, for 
                more than 2 terms, whether or not such terms of service 
                are consecutive.
            (6) Removal from office.--A member of the Board may be 
        removed by the Commission from office, in accordance with 
        section 107(d)(3), for good cause shown before the expiration of 
        the term of that member.

    (f) Powers of the Board.--In addition to any authority granted to 
the Board otherwise in this Act, the Board shall have the power, subject 
to section 107--
            (1) to sue and be sued, complain and defend, in its 
        corporate name and through its own counsel, with the approval of 
        the Commission, in any Federal, State, or other court;
            (2) to conduct its operations and maintain offices, and to 
        exercise all other rights and powers authorized by this Act, in 
        any State, without regard to any qualification, licensing, or 
        other provision of law in effect in such State (or a political 
        subdivision thereof);
            (3) to lease, purchase, accept gifts or donations of or 
        otherwise acquire, improve, use, sell, exchange, or convey, all 
        of or an interest in any property, wherever situated;
            (4) to appoint such employees, accountants, attorneys, and 
        other agents as may be necessary or appropriate, and to 
        determine their qualifications, define their duties, and fix 
        their salaries or other compensation (at a level that is 
        comparable to private sector self-regulatory, accounting, 
        technical, supervisory, or other staff or management positions);
            (5) to allocate, assess, and collect accounting support fees 
        established pursuant to section 109, for the Board, and other 
        fees and charges imposed under this title; and
            (6) to <<NOTE: Contracts.>> enter into contracts, execute 
        instruments, incur liabilities, and do any and all other acts 
        and things necessary, appropriate, or incidental to the conduct 
        of its operations and the exercise of its obligations, rights, 
        and powers imposed or granted by this title.

[[Page 116 STAT. 753]]

    (g) Rules of the Board.--The rules of the Board shall, subject to 
the approval of the Commission--
            (1) provide for the operation and administration of the 
        Board, the exercise of its authority, and the performance of its 
        responsibilities under this Act;
            (2) permit, as the Board determines necessary or 
        appropriate, delegation by the Board of any of its functions to 
        an individual member or employee of the Board, or to a division 
        of the Board, including functions with respect to hearing, 
        determining, ordering, certifying, reporting, or otherwise 
        acting as to any matter, except that--
                    (A) the Board shall retain a discretionary right to 
                review any action pursuant to any such delegated 
                function, upon its own motion;
                    (B) a person shall be entitled to a review by the 
                Board with respect to any matter so delegated, and the 
                decision of the Board upon such review shall be deemed 
                to be the action of the Board for all purposes 
                (including appeal or review thereof); and
                    (C) if the right to exercise a review described in 
                subparagraph (A) is declined, or if no such review is 
                sought within the time stated in the rules of the Board, 
                then the action taken by the holder of such delegation 
                shall for all purposes, including appeal or review 
                thereof, be deemed to be the action of the Board;
            (3) establish ethics rules and standards of conduct for 
        Board members and staff, including a bar on practice before the 
        Board (and the Commission, with respect to Board-related 
        matters) of 1 year for former members of the Board, and 
        appropriate periods (not to exceed 1 year) for former staff of 
        the Board; and
            (4) provide as otherwise required by this Act.

    (h) Annual Report <<NOTE: Deadline.>> to the Commission.--The Board 
shall submit an annual report (including its audited financial 
statements) to the Commission, and the Commission shall transmit a copy 
of that report to the Committee on Banking, Housing, and Urban Affairs 
of the Senate, and the Committee on Financial Services of the House of 
Representatives, not later than 30 days after the date of receipt of 
that report by the Commission.

SEC. 102. <<NOTE: 15 USC 7212.>> REGISTRATION WITH THE BOARD.

    (a) Mandatory Registration.--Beginning 180 days after the date of 
the determination of the Commission under section 101(d), it shall be 
unlawful for any person that is not a registered public accounting firm 
to prepare or issue, or to participate in the preparation or issuance 
of, any audit report with respect to any issuer.
    (b) Applications for Registration.--
            (1) Form of application.--A public accounting firm shall use 
        such form as the Board may prescribe, by rule, to apply for 
        registration under this section.
            (2) Contents of applications.--Each public accounting firm 
        shall submit, as part of its application for registration, in 
        such detail as the Board shall specify--
                    (A) the names of all issuers for which the firm 
                prepared or issued audit reports during the immediately 
                preceding calendar year, and for which the firm expects 
                to prepare or issue audit reports during the current 
                calendar year;

[[Page 116 STAT. 754]]

                    (B) the annual fees received by the firm from each 
                such issuer for audit services, other accounting 
                services, and non-audit services, respectively;
                    (C) such other current financial information for the 
                most recently completed fiscal year of the firm as the 
                Board may reasonably request;
                    (D) a statement of the quality control policies of 
                the firm for its accounting and auditing practices;
                    (E) a list of all accountants associated with the 
                firm who participate in or contribute to the preparation 
                of audit reports, stating the license or certification 
                number of each such person, as well as the State license 
                numbers of the firm itself;
                    (F) information relating to criminal, civil, or 
                administrative actions or disciplinary proceedings 
                pending against the firm or any associated person of the 
                firm in connection with any audit report;
                    (G) copies of any periodic or annual disclosure 
                filed by an issuer with the Commission during the 
                immediately preceding calendar year which discloses 
                accounting disagreements between such issuer and the 
                firm in connection with an audit report furnished or 
                prepared by the firm for such issuer; and
                    (H) such other information as the rules of the Board 
                or the Commission shall specify as necessary or 
                appropriate in the public interest or for the protection 
                of investors.
            (3) Consents.--Each application for registration under this 
        subsection shall include--
                    (A) a consent executed by the public accounting firm 
                to cooperation in and compliance with any request for 
                testimony or the production of documents made by the 
                Board in the furtherance of its authority and 
                responsibilities under this title (and an agreement to 
                secure and enforce similar consents from each of the 
                associated persons of the public accounting firm as a 
                condition of their continued employment by or other 
                association with such firm); and
                    (B) a statement that such firm understands and 
                agrees that cooperation and compliance, as described in 
                the consent required by subparagraph (A), and the 
                securing and enforcement of such consents from its 
                associated persons, in accordance with the rules of the 
                Board, shall be a condition to the continuing 
                effectiveness of the registration of the firm with the 
                Board.

    (c) Action on Applications.--
            (1) Timing.--The <<NOTE: Deadline.>> Board shall approve a 
        completed application for registration not later than 45 days 
        after the date of receipt of the application, in accordance with 
        the rules of the Board, unless the Board, prior to such date, 
        issues a written notice of disapproval to, or requests more 
        information from, the prospective registrant.
            (2) Treatment.--A written notice of disapproval of a 
        completed application under paragraph (1) for registration shall 
        be treated as a disciplinary sanction for purposes of sections 
        105(d) and 107(c).

    (d) Periodic Reports.--Each registered public accounting firm shall 
submit an annual report to the Board, and may be required

[[Page 116 STAT. 755]]

to report more frequently, as necessary to update the information 
contained in its application for registration under this section, and to 
provide to the Board such additional information as the Board or the 
Commission may specify, in accordance with subsection (b)(2).
    (e) Public Availability.--Registration applications and annual 
reports required by this subsection, or such portions of such 
applications or reports as may be designated under rules of the Board, 
shall be made available for public inspection, subject to rules of the 
Board or the Commission, and to applicable laws relating to the 
confidentiality of proprietary, personal, or other information contained 
in such applications or reports, provided that, in all events, the Board 
shall protect from public disclosure information reasonably identified 
by the subject accounting firm as proprietary information.
    (f) Registration and Annual Fees.--The Board shall assess and 
collect a registration fee and an annual fee from each registered public 
accounting firm, in amounts that are sufficient to recover the costs of 
processing and reviewing applications and annual reports.

SEC. 103. <<NOTE: 15 USC 7213.>> AUDITING, QUALITY CONTROL, AND 
            INDEPENDENCE STANDARDS AND RULES.

    (a) Auditing, Quality Control, and Ethics Standards.--
            (1) In general.--The Board shall, by rule, establish, 
        including, to the extent it determines appropriate, through 
        adoption of standards proposed by 1 or more professional groups 
        of accountants designated pursuant to paragraph (3)(A) or 
        advisory groups convened pursuant to paragraph (4), and amend or 
        otherwise modify or alter, such auditing and related attestation 
        standards, such quality control standards, and such ethics 
        standards to be used by registered public accounting firms in 
        the preparation and issuance of audit reports, as required by 
        this Act or the rules of the Commission, or as may be necessary 
        or appropriate in the public interest or for the protection of 
        investors.
            (2) Rule requirements.--In carrying out paragraph (1), the 
        Board--
                    (A) shall include in the auditing standards that it 
                adopts, requirements that each registered public 
                accounting firm shall--
                          (i) prepare, and maintain for a period of not 
                      less than 7 years, audit work papers, and other 
                      information related to any audit report, in 
                      sufficient detail to support the conclusions 
                      reached in such report;
                          (ii) provide a concurring or second partner 
                      review and approval of such audit report (and 
                      other related information), and concurring 
                      approval in its issuance, by a qualified person 
                      (as prescribed by the Board) associated with the 
                      public accounting firm, other than the person in 
                      charge of the audit, or by an independent reviewer 
                      (as prescribed by the Board); and
                          (iii) describe in each audit report the scope 
                      of the auditor's testing of the internal control 
                      structure and procedures of the issuer, required 
                      by section 404(b), and present (in such report or 
                      in a separate report)--

[[Page 116 STAT. 756]]

                                    (I) the findings of the auditor from 
                                such testing;
                                    (II) an evaluation of whether such 
                                internal control structure and 
                                procedures--
                                            (aa) include maintenance of 
                                        records that in reasonable 
                                        detail accurately and fairly 
                                        reflect the transactions and 
                                        dispositions of the assets of 
                                        the issuer;
                                            (bb) provide reasonable 
                                        assurance that transactions are 
                                        recorded as necessary to permit 
                                        preparation of financial 
                                        statements in accordance with 
                                        generally accepted accounting 
                                        principles, and that receipts 
                                        and expenditures of the issuer 
                                        are being made only in 
                                        accordance with authorizations 
                                        of management and directors of 
                                        the issuer; and
                                    (III) a description, at a minimum, 
                                of material weaknesses in such internal 
                                controls, and of any material 
                                noncompliance found on the basis of such 
                                testing.
                    (B) shall include, in the quality control standards 
                that it adopts with respect to the issuance of audit 
                reports, requirements for every registered public 
                accounting firm relating to--
                          (i) monitoring of professional ethics and 
                      independence from issuers on behalf of which the 
                      firm issues audit reports;
                          (ii) consultation within such firm on 
                      accounting and auditing questions;
                          (iii) supervision of audit work;
                          (iv) hiring, professional development, and 
                      advancement of personnel;
                          (v) the acceptance and continuation of 
                      engagements;
                          (vi) internal inspection; and
                          (vii) such other requirements as the Board may 
                      prescribe, subject to subsection (a)(1).
            (3) Authority to adopt other standards.--
                    (A) In general.--In carrying out this subsection, 
                the Board--
                          (i) may adopt as its rules, subject to the 
                      terms of section 107, any portion of any statement 
                      of auditing standards or other professional 
                      standards that the Board determines satisfy the 
                      requirements of paragraph (1), and that were 
                      proposed by 1 or more professional groups of 
                      accountants that shall be designated or recognized 
                      by the Board, by rule, for such purpose, pursuant 
                      to this paragraph or 1 or more advisory groups 
                      convened pursuant to paragraph (4); and
                          (ii) notwithstanding clause (i), shall retain 
                      full authority to modify, supplement, revise, or 
                      subsequently amend, modify, or repeal, in whole or 
                      in part, any portion of any statement described in 
                      clause (i).
                    (B) Initial and transitional standards.--The Board 
                shall adopt standards described in subparagraph (A)(i) 
                as initial or transitional standards, to the extent the 
                Board determines necessary, prior to a determination of 
                the

[[Page 116 STAT. 757]]

                Commission under section 101(d), and such standards 
                shall be separately approved by the Commission at the 
                time of that determination, without regard to the 
                procedures required by section 107 that otherwise would 
                apply to the approval of rules of the Board.
            (4) Advisory groups.--The Board shall convene, or authorize 
        its staff to convene, such expert advisory groups as may be 
        appropriate, which may include practicing accountants and other 
        experts, as well as representatives of other interested groups, 
        subject to such rules as the Board may prescribe to prevent 
        conflicts of interest, to make recommendations concerning the 
        content (including proposed drafts) of auditing, quality 
        control, ethics, independence, or other standards required to be 
        established under this section.

    (b) Independence Standards and Rules.--The Board shall establish 
such rules as may be necessary or appropriate in the public interest or 
for the protection of investors, to implement, or as authorized under, 
title II of this Act.
    (c) Cooperation With Designated Professional Groups of Accountants 
and Advisory Groups.--
            (1) In general.--The Board shall cooperate on an ongoing 
        basis with professional groups of accountants designated under 
        subsection (a)(3)(A) and advisory groups convened under 
        subsection (a)(4) in the examination of the need for changes in 
        any standards subject to its authority under subsection (a), 
        recommend issues for inclusion on the agendas of such designated 
        professional groups of accountants or advisory groups, and take 
        such other steps as it deems appropriate to increase the 
        effectiveness of the standard setting process.
            (2) Board responses.--The Board shall respond in a timely 
        fashion to requests from designated professional groups of 
        accountants and advisory groups referred to in paragraph (1) for 
        any changes in standards over which the Board has authority.

    (d) Evaluation of Standard Setting Process.--The Board shall include 
in the annual report required by section 101(h) the results of its 
standard setting responsibilities during the period to which the report 
relates, including a discussion of the work of the Board with any 
designated professional groups of accountants and advisory groups 
described in paragraphs (3)(A) and (4) of subsection (a), and its 
pending issues agenda for future standard setting projects.


SEC. 104. <<NOTE: 15 USC 7214.>> INSPECTIONS OF REGISTERED PUBLIC 
            ACCOUNTING FIRMS.

    (a) In General.--The Board shall conduct a continuing program of 
inspections to assess the degree of compliance of each registered public 
accounting firm and associated persons of that firm with this Act, the 
rules of the Board, the rules of the Commission, or professional 
standards, in connection with its performance of audits, issuance of 
audit reports, and related matters involving issuers.
    (b) Inspection Frequency.--
            (1) In general.--Subject to paragraph (2), inspections 
        required by this section shall be conducted--
                    (A) annually with respect to each registered public 
                accounting firm that regularly provides audit reports 
                for more than 100 issuers; and

[[Page 116 STAT. 758]]

                    (B) not less frequently than once every 3 years with 
                respect to each registered public accounting firm that 
                regularly provides audit reports for 100 or fewer 
                issuers.
            (2) Adjustments to schedules.--The Board may, by rule, 
        adjust the inspection schedules set under paragraph (1) if the 
        Board finds that different inspection schedules are consistent 
        with the purposes of this Act, the public interest, and the 
        protection of investors. The Board may conduct special 
        inspections at the request of the Commission or upon its own 
        motion.

    (c) Procedures.--The Board shall, in each inspection under this 
section, and in accordance with its rules for such inspections--
            (1) identify any act or practice or omission to act by the 
        registered public accounting firm, or by any associated person 
        thereof, revealed by such inspection that may be in violation of 
        this Act, the rules of the Board, the rules of the Commission, 
        the firm's own quality control policies, or professional 
        standards;
            (2) report any such act, practice, or omission, if 
        appropriate, to the Commission and each appropriate State 
        regulatory authority; and
            (3) begin a formal investigation or take disciplinary 
        action, if appropriate, with respect to any such violation, in 
        accordance with this Act and the rules of the Board.

    (d) Conduct of Inspections.--In conducting an inspection of a 
registered public accounting firm under this section, the Board shall--
            (1) inspect and review selected audit and review engagements 
        of the firm (which may include audit engagements that are the 
        subject of ongoing litigation or other controversy between the 
        firm and 1 or more third parties), performed at various offices 
        and by various associated persons of the firm, as selected by 
        the Board;
            (2) evaluate the sufficiency of the quality control system 
        of the firm, and the manner of the documentation and 
        communication of that system by the firm; and
            (3) perform such other testing of the audit, supervisory, 
        and quality control procedures of the firm as are necessary or 
        appropriate in light of the purpose of the inspection and the 
        responsibilities of the Board.

    (e) Record Retention.--The rules of the Board may require the 
retention by registered public accounting firms for inspection purposes 
of records whose retention is not otherwise required by section 103 or 
the rules issued thereunder.
    (f) Procedures for Review.--The rules of the Board shall provide a 
procedure for the review of and response to a draft inspection report by 
the registered public accounting firm under inspection. The Board shall 
take such action with respect to such response as it considers 
appropriate (including revising the draft report or continuing or 
supplementing its inspection activities before issuing a final report), 
but the text of any such response, appropriately redacted to protect 
information reasonably identified by the accounting firm as 
confidential, shall be attached to and made part of the inspection 
report.
    (g) Report.--A written report of the findings of the Board for each 
inspection under this section, subject to subsection (h), shall be--

[[Page 116 STAT. 759]]

            (1) transmitted, in appropriate detail, to the Commission 
        and each appropriate State regulatory authority, accompanied by 
        any letter or comments by the Board or the inspector, and any 
        letter of response from the registered public accounting firm; 
        and
            (2) made available in appropriate detail to the public 
        (subject to section 105(b)(5)(A), and to the protection of such 
        confidential and proprietary information as the Board may 
        determine to be appropriate, or as may be required by law), 
        except that no portions of the inspection report that deal with 
        criticisms of or potential defects in the quality control 
        systems of the firm under inspection shall be made public if 
        those criticisms or defects are addressed by the firm, to the 
        satisfaction of the Board, not later than 12 months after the 
        date of the inspection report.

    (h) Interim Commission Review.--
            (1) Reviewable matters.--A registered public accounting firm 
        may seek review by the Commission, pursuant to such rules as the 
        Commission shall promulgate, if the firm--
                    (A) has provided the Board with a response, pursuant 
                to rules issued by the Board under subsection (f), to 
                the substance of particular items in a draft inspection 
                report, and disagrees with the assessments contained in 
                any final report prepared by the Board following such 
                response; or
                    (B) disagrees with the determination of the Board 
                that criticisms or defects identified in an inspection 
                report have not been addressed to the satisfaction of 
                the Board within 12 months of the date of the inspection 
                report, for purposes of subsection (g)(2).
            (2) Treatment of review.--Any decision of the Commission 
        with respect to a review under paragraph (1) shall not be 
        reviewable under section 25 of the Securities Exchange Act of 
        1934 (15 U.S.C. 78y), or deemed to be ``final agency action'' 
        for purposes of section 704 of title 5, United States Code.
            (3) Timing.--Review under paragraph (1) may be sought during 
        the 30-day period following the date of the event giving rise to 
        the review under subparagraph (A) or (B) of paragraph (1).

SEC. 105. <<NOTE: 15 USC 7215.>> INVESTIGATIONS AND DISCIPLINARY 
            PROCEEDINGS.

    (a) In General.--The <<NOTE: Establishment.>> Board shall establish, 
by rule, subject to the requirements of this section, fair procedures 
for the investigation and disciplining of registered public accounting 
firms and associated persons of such firms.

    (b) Investigations.--
            (1) Authority.--In accordance with the rules of the Board, 
        the Board may conduct an investigation of any act or practice, 
        or omission to act, by a registered public accounting firm, any 
        associated person of such firm, or both, that may violate any 
        provision of this Act, the rules of the Board, the provisions of 
        the securities laws relating to the preparation and issuance of 
        audit reports and the obligations and liabilities of accountants 
        with respect thereto, including the rules of the Commission 
        issued under this Act, or professional standards, regardless of 
        how the act, practice, or omission is brought to the attention 
        of the Board.

[[Page 116 STAT. 760]]

            (2) Testimony and document production.--In addition to such 
        other actions as the Board determines to be necessary or 
        appropriate, the rules of the Board may--
                    (A) require the testimony of the firm or of any 
                person associated with a registered public accounting 
                firm, with respect to any matter that the Board 
                considers relevant or material to an investigation;
                    (B) require the production of audit work papers and 
                any other document or information in the possession of a 
                registered public accounting firm or any associated 
                person thereof, wherever domiciled, that the Board 
                considers relevant or material to the investigation, and 
                may inspect the books and records of such firm or 
                associated person to verify the accuracy of any 
                documents or information supplied;
                    (C) request the testimony of, and production of any 
                document in the possession of, any other person, 
                including any client of a registered public accounting 
                firm that the Board considers relevant or material to an 
                investigation under this section, with appropriate 
                notice, subject to the needs of the investigation, as 
                permitted under the rules of the Board; and
                    (D) provide for procedures to seek issuance by the 
                Commission, in a manner established by the Commission, 
                of a subpoena to require the testimony of, and 
                production of any document in the possession of, any 
                person, including any client of a registered public 
                accounting firm, that the Board considers relevant or 
                material to an investigation under this section.
            (3) Noncooperation with investigations.--
                    (A) In general.--If a registered public accounting 
                firm or any associated person thereof refuses to 
                testify, produce documents, or otherwise cooperate with 
                the Board in connection with an investigation under this 
                section, the Board may--
                          (i) suspend or bar such person from being 
                      associated with a registered public accounting 
                      firm, or require the registered public accounting 
                      firm to end such association;
                          (ii) suspend or revoke the registration of the 
                      public accounting firm; and
                          (iii) invoke such other lesser sanctions as 
                      the Board considers appropriate, and as specified 
                      by rule of the Board.
                    (B) Procedure.--Any action taken by the Board under 
                this paragraph shall be subject to the terms of section 
                107(c).
            (4) Coordination and referral of investigations.--
                    (A) Coordination.--The <<NOTE: Notification.>> Board 
                shall notify the Commission of any pending Board 
                investigation involving a potential violation of the 
                securities laws, and thereafter coordinate its work with 
                the work of the Commission's Division of Enforcement, as 
                necessary to protect an ongoing Commission 
                investigation.
                    (B) Referral.--The Board may refer an investigation 
                under this section--
                          (i) to the Commission;

[[Page 116 STAT. 761]]

                          (ii) to any other Federal functional regulator 
                      (as defined in section 509 of the Gramm-Leach-
                      Bliley Act (15 U.S.C. 6809)), in the case of an 
                      investigation that concerns an audit report for an 
                      institution that is subject to the jurisdiction of 
                      such regulator; and
                          (iii) at the direction of the Commission, to--
                                    (I) the Attorney General of the 
                                United States;
                                    (II) the attorney general of 1 or 
                                more States; and
                                    (III) the appropriate State 
                                regulatory authority.
            (5) Use of documents.--
                    (A) Confidentiality.--Except as provided in 
                subparagraph (B), all documents and information prepared 
                or received by or specifically for the Board, and 
                deliberations of the Board and its employees and agents, 
                in connection with an inspection under section 104 or 
                with an investigation under this section, shall be 
                confidential and privileged as an evidentiary matter 
                (and shall not be subject to civil discovery or other 
                legal process) in any proceeding in any Federal or State 
                court or administrative agency, and shall be exempt from 
                disclosure, in the hands of an agency or establishment 
                of the Federal Government, under the Freedom of 
                Information Act (5 U.S.C. 552a), or otherwise, unless 
                and until presented in connection with a public 
                proceeding or released in accordance with subsection 
                (c).
                    (B) Availability to government agencies.--Without 
                the loss of its status as confidential and privileged in 
                the hands of the Board, all information referred to in 
                subparagraph (A) may--
                          (i) be made available to the Commission; and
                          (ii) in the discretion of the Board, when 
                      determined by the Board to be necessary to 
                      accomplish the purposes of this Act or to protect 
                      investors, be made available to--
                                    (I) the Attorney General of the 
                                United States;
                                    (II) the appropriate Federal 
                                functional regulator (as defined in 
                                section 509 of the Gramm-Leach-Bliley 
                                Act (15 U.S.C. 6809)), other than the 
                                Commission, with respect to an audit 
                                report for an institution subject to the 
                                jurisdiction of such regulator;
                                    (III) State attorneys general in 
                                connection with any criminal 
                                investigation; and
                                    (IV) any appropriate State 
                                regulatory authority,
                each of which shall maintain such information as 
                confidential and privileged.
            (6) Immunity.--Any employee of the Board engaged in carrying 
        out an investigation under this Act shall be immune from any 
        civil liability arising out of such investigation in the same 
        manner and to the same extent as an employee of the Federal 
        Government in similar circumstances.

    (c) Disciplinary Procedures.--
            (1) Notification; recordkeeping.--The rules of the Board 
        shall provide that in any proceeding by the Board to determine

[[Page 116 STAT. 762]]

        whether a registered public accounting firm, or an associated 
        person thereof, should be disciplined, the Board shall--
                    (A) bring specific charges with respect to the firm 
                or associated person;
                    (B) notify such firm or associated person of, and 
                provide to the firm or associated person an opportunity 
                to defend against, such charges; and
                    (C) keep a record of the proceedings.
            (2) Public hearings.--Hearings under this section shall not 
        be public, unless otherwise ordered by the Board for good cause 
        shown, with the consent of the parties to such hearing.
            (3) Supporting statement.--A determination by the Board to 
        impose a sanction under this subsection shall be supported by a 
        statement setting forth--
                    (A) each act or practice in which the registered 
                public accounting firm, or associated person, has 
                engaged (or omitted to engage), or that forms a basis 
                for all or a part of such sanction;
                    (B) the specific provision of this Act, the 
                securities laws, the rules of the Board, or professional 
                standards which the Board determines has been violated; 
                and
                    (C) the sanction imposed, including a justification 
                for that sanction.
            (4) Sanctions.--If the Board finds, based on all of the 
        facts and circumstances, that a registered public accounting 
        firm or associated person thereof has engaged in any act or 
        practice, or omitted to act, in violation of this Act, the rules 
        of the Board, the provisions of the securities laws relating to 
        the preparation and issuance of audit reports and the 
        obligations and liabilities of accountants with respect thereto, 
        including the rules of the Commission issued under this Act, or 
        professional standards, the Board may impose such disciplinary 
        or remedial sanctions as it determines appropriate, subject to 
        applicable limitations under paragraph (5), including--
                    (A) temporary suspension or permanent revocation of 
                registration under this title;
                    (B) temporary or permanent suspension or bar of a 
                person from further association with any registered 
                public accounting firm;
                    (C) temporary or permanent limitation on the 
                activities, functions, or operations of such firm or 
                person (other than in connection with required 
                additional professional education or training);
                    (D) a civil money penalty for each such violation, 
                in an amount equal to--
                          (i) not more than $100,000 for a natural 
                      person or $2,000,000 for any other person; and
                          (ii) in any case to which paragraph (5) 
                      applies, not more than $750,000 for a natural 
                      person or $15,000,000 for any other person;
                    (E) censure;
                    (F) required additional professional education or 
                training; or
                    (G) any other appropriate sanction provided for in 
                the rules of the Board.

[[Page 116 STAT. 763]]

            (5) Intentional or other knowing conduct.--The sanctions and 
        penalties described in subparagraphs (A) through (C) and (D)(ii) 
        of paragraph (4) shall only apply to--
                    (A) intentional or knowing conduct, including 
                reckless conduct, that results in violation of the 
                applicable statutory, regulatory, or professional 
                standard; or
                    (B) repeated instances of negligent conduct, each 
                resulting in a violation of the applicable statutory, 
                regulatory, or professional standard.
            (6) Failure to supervise.--
                    (A) In general.--The Board may impose sanctions 
                under this section on a registered accounting firm or 
                upon the supervisory personnel of such firm, if the 
                Board finds that--
                          (i) the firm has failed reasonably to 
                      supervise an associated person, either as required 
                      by the rules of the Board relating to auditing or 
                      quality control standards, or otherwise, with a 
                      view to preventing violations of this Act, the 
                      rules of the Board, the provisions of the 
                      securities laws relating to the preparation and 
                      issuance of audit reports and the obligations and 
                      liabilities of accountants with respect thereto, 
                      including the rules of the Commission under this 
                      Act, or professional standards; and
                          (ii) such associated person commits a 
                      violation of this Act, or any of such rules, laws, 
                      or standards.
                    (B) Rule of construction.--No associated person of a 
                registered public accounting firm shall be deemed to 
                have failed reasonably to supervise any other person for 
                purposes of subparagraph (A), if--
                          (i) there have been established in and for 
                      that firm procedures, and a system for applying 
                      such procedures, that comply with applicable rules 
                      of the Board and that would reasonably be expected 
                      to prevent and detect any such violation by such 
                      associated person; and
                          (ii) such person has reasonably discharged the 
                      duties and obligations incumbent upon that person 
                      by reason of such procedures and system, and had 
                      no reasonable cause to believe that such 
                      procedures and system were not being complied 
                      with.
            (7) Effect of suspension.--
                    (A) Association with a public accounting firm.--It 
                shall be unlawful for any person that is suspended or 
                barred from being associated with a registered public 
                accounting firm under this subsection willfully to 
                become or remain associated with any registered public 
                accounting firm, or for any registered public accounting 
                firm that knew, or, in the exercise of reasonable care 
                should have known, of the suspension or bar, to permit 
                such an association, without the consent of the Board or 
                the Commission.
                    (B) Association with an issuer.--It shall be 
                unlawful for any person that is suspended or barred from 
                being associated with an issuer under this subsection 
                willfully to become or remain associated with any issuer 
                in an accountancy or a financial management capacity, 
                and for any issuer that knew, or in the exercise of 
                reasonable

[[Page 116 STAT. 764]]

                care should have known, of such suspension or bar, to 
                permit such an association, without the consent of the 
                Board or the Commission.

    (d) Reporting of Sanctions.--
            (1) Recipients.--If the Board imposes a disciplinary 
        sanction, in accordance with this section, the Board shall 
        report the sanction to--
                    (A) the Commission;
                    (B) any appropriate State regulatory authority or 
                any foreign accountancy licensing board with which such 
                firm or person is licensed or certified; and
                    (C) the public (once any stay on the imposition of 
                such sanction has been lifted).
            (2) Contents.--The information reported under paragraph (1) 
        shall include--
                    (A) the name of the sanctioned person;
                    (B) a description of the sanction and the basis for 
                its imposition; and
                    (C) such other information as the Board deems 
                appropriate.

    (e) Stay of Sanctions.--
            (1) In general.--Application to the Commission for review, 
        or the institution by the Commission of review, of any 
        disciplinary action of the Board shall operate as a stay of any 
        such disciplinary action, unless and until the Commission orders 
        (summarily or after notice and opportunity for hearing on the 
        question of a stay, which hearing may consist solely of the 
        submission of affidavits or presentation of oral arguments) that 
        no such stay shall continue to operate.
            (2) Expedited procedures.--The Commission shall establish 
        for appropriate cases an expedited procedure for consideration 
        and determination of the question of the duration of a stay 
        pending review of any disciplinary action of the Board under 
        this subsection.

SEC. 106. <<NOTE: 15 USC 7216.>> FOREIGN PUBLIC ACCOUNTING FIRMS.

    (a) Applicability to Certain Foreign Firms.--
            (1) In general.--Any foreign public accounting firm that 
        prepares or furnishes an audit report with respect to any 
        issuer, shall be subject to this Act and the rules of the Board 
        and the Commission issued under this Act, in the same manner and 
        to the same extent as a public accounting firm that is organized 
        and operates under the laws of the United States or any State, 
        except that registration pursuant to section 102 shall not by 
        itself provide a basis for subjecting such a foreign public 
        accounting firm to the jurisdiction of the Federal or State 
        courts, other than with respect to controversies between such 
        firms and the Board.
            (2) Board authority.--The Board may, by rule, determine that 
        a foreign public accounting firm (or a class of such firms) that 
        does not issue audit reports nonetheless plays such a 
        substantial role in the preparation and furnishing of such 
        reports for particular issuers, that it is necessary or 
        appropriate, in light of the purposes of this Act and in the 
        public interest or for the protection of investors, that such 
        firm (or class of firms) should be treated as a public 
        accounting firm

[[Page 116 STAT. 765]]

        (or firms) for purposes of registration under, and oversight by 
        the Board in accordance with, this title.

    (b) Production of Audit Workpapers.--
            (1) Consent by foreign firms.--If a foreign public 
        accounting firm issues an opinion or otherwise performs material 
        services upon which a registered public accounting firm relies 
        in issuing all or part of any audit report or any opinion 
        contained in an audit report, that foreign public accounting 
        firm shall be deemed to have consented--
                    (A) to produce its audit workpapers for the Board or 
                the Commission in connection with any investigation by 
                either body with respect to that audit report; and
                    (B) to be subject to the jurisdiction of the courts 
                of the United States for purposes of enforcement of any 
                request for production of such workpapers.
            (2) Consent by domestic firms.--A registered public 
        accounting firm that relies upon the opinion of a foreign public 
        accounting firm, as described in paragraph (1), shall be 
        deemed--
                    (A) to have consented to supplying the audit 
                workpapers of that foreign public accounting firm in 
                response to a request for production by the Board or the 
                Commission; and
                    (B) to have secured the agreement of that foreign 
                public accounting firm to such production, as a 
                condition of its reliance on the opinion of that foreign 
                public accounting firm.

    (c) Exemption Authority.--The Commission, and the Board, subject to 
the approval of the Commission, may, by rule, regulation, or order, and 
as the Commission (or Board) determines necessary or appropriate in the 
public interest or for the protection of investors, either 
unconditionally or upon specified terms and conditions exempt any 
foreign public accounting firm, or any class of such firms, from any 
provision of this Act or the rules of the Board or the Commission issued 
under this Act.
    (d) Definition.--In this section, the term ``foreign public 
accounting firm'' means a public accounting firm that is organized and 
operates under the laws of a foreign government or political subdivision 
thereof.

SEC. 107. <<NOTE: 15 USC 7217.>> COMMISSION OVERSIGHT OF THE BOARD.

    (a) General Oversight Responsibility.--The Commission shall have 
oversight and enforcement authority over the Board, as provided in this 
Act. The provisions of section 17(a)(1) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78q(a)(1)), and of section 17(b)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78q(b)(1)) shall apply to the Board as 
fully as if the Board were a ``registered securities association'' for 
purposes of those sections 17(a)(1) and 17(b)(1).
    (b) Rules of the Board.--
            (1) Definition.--In this section, the term ``proposed rule'' 
        means any proposed rule of the Board, and any modification of 
        any such rule.
            (2) Prior approval required.--No rule of the Board shall 
        become effective without prior approval of the Commission in 
        accordance with this section, other than as provided in section 
        103(a)(3)(B) with respect to initial or transitional standards.

[[Page 116 STAT. 766]]

            (3) Approval criteria.--The Commission shall approve a 
        proposed rule, if it finds that the rule is consistent with the 
        requirements of this Act and the securities laws, or is 
        necessary or appropriate in the public interest or for the 
        protection of investors.
            (4) Proposed rule procedures.--The provisions of paragraphs 
        (1) through (3) of section 19(b) of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78s(b)) shall govern the proposed rules of 
        the Board, as fully as if the Board were a ``registered 
        securities association'' for purposes of that section 19(b), 
        except that, for purposes of this paragraph--
                    (A) the phrase ``consistent with the requirements of 
                this title and the rules and regulations thereunder 
                applicable to such organization'' in section 19(b)(2) of 
                that Act shall be deemed to read ``consistent with the 
                requirements of title I of the Sarbanes-Oxley Act of 
                2002, and the rules and regulations issued thereunder 
                applicable to such organization, or as necessary or 
                appropriate in the public interest or for the protection 
                of investors''; and
                    (B) the phrase ``otherwise in furtherance of the 
                purposes of this title'' in section 19(b)(3)(C) of that 
                Act shall be deemed to read ``otherwise in furtherance 
                of the purposes of title I of the Sarbanes-Oxley Act of 
                2002''.
            (5) Commission authority to amend rules of the board.--The 
        provisions of section 19(c) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78s(c)) shall govern the abrogation, deletion, 
        or addition to portions of the rules of the Board by the 
        Commission as fully as if the Board were a ``registered 
        securities association'' for purposes of that section 19(c), 
        except that the phrase ``to conform its rules to the 
        requirements of this title and the rules and regulations 
        thereunder applicable to such organization, or otherwise in 
        furtherance of the purposes of this title'' in section 19(c) of 
        that Act shall, for purposes of this paragraph, be deemed to 
        read ``to assure the fair administration of the Public Company 
        Accounting Oversight Board, conform the rules promulgated by 
        that Board to the requirements of title I of the Sarbanes-Oxley 
        Act of 2002, or otherwise further the purposes of that Act, the 
        securities laws, and the rules and regulations thereunder 
        applicable to that Board''.

    (c) Commission Review of Disciplinary Action Taken by the Board.--
            (1) Notice of sanction.--The Board shall promptly file 
        notice with the Commission of any final sanction on any 
        registered public accounting firm or on any associated person 
        thereof, in such form and containing such information as the 
        Commission, by rule, may prescribe.
            (2) Review of sanctions.--The provisions of sections 
        19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78s (d)(2) and (e)(1)) shall govern the review by the 
        Commission of final disciplinary sanctions imposed by the Board 
        (including sanctions imposed under section 105(b)(3) of this Act 
        for noncooperation in an investigation of the Board), as fully 
        as if the Board were a self-regulatory organization and the 
        Commission were the appropriate regulatory agency for such 
        organization for purposes of those sections 19(d)(2) and 
        19(e)(1), except that, for purposes of this paragraph--

[[Page 116 STAT. 767]]

                    (A) section 105(e) of this Act (rather than that 
                section 19(d)(2)) shall govern the extent to which 
                application for, or institution by the Commission on its 
                own motion of, review of any disciplinary action of the 
                Board operates as a stay of such action;
                    (B) references in that section 19(e)(1) to 
                ``members'' of such an organization shall be deemed to 
                be references to registered public accounting firms;
                    (C) the phrase ``consistent with the purposes of 
                this title'' in that section 19(e)(1) shall be deemed to 
                read ``consistent with the purposes of this title and 
                title I of the Sarbanes-Oxley Act of 2002'';
                    (D) references to rules of the Municipal Securities 
                Rulemaking Board in that section 19(e)(1) shall not 
                apply; and
                    (E) the reference to section 19(e)(2) of the 
                Securities Exchange Act of 1934 shall refer instead to 
                section 107(c)(3) of this Act.
            (3) Commission modification authority.--The Commission may 
        enhance, modify, cancel, reduce, or require the remission of a 
        sanction imposed by the Board upon a registered public 
        accounting firm or associated person thereof, if the Commission, 
        having due regard for the public interest and the protection of 
        investors, finds, after a proceeding in accordance with this 
        subsection, that the sanction--
                    (A) is not necessary or appropriate in furtherance 
                of this Act or the securities laws; or
                    (B) is excessive, oppressive, inadequate, or 
                otherwise not appropriate to the finding or the basis on 
                which the sanction was imposed.

    (d) Censure of the Board; Other Sanctions.--
            (1) Rescission of board authority.--The Commission, by rule, 
        consistent with the public interest, the protection of 
        investors, and the other purposes of this Act and the securities 
        laws, may relieve the Board of any responsibility to enforce 
        compliance with any provision of this Act, the securities laws, 
        the rules of the Board, or professional standards.
            (2) Censure of the board; limitations.--The Commission may, 
        by order, as it determines necessary or appropriate in the 
        public interest, for the protection of investors, or otherwise 
        in furtherance of the purposes of this Act or the securities 
        laws, censure or impose limitations upon the activities, 
        functions, and operations of the Board, if the Commission finds, 
        on the record, after notice and opportunity for a hearing, that 
        the Board--
                    (A) has violated or is unable to comply with any 
                provision of this Act, the rules of the Board, or the 
                securities laws; or
                    (B) without reasonable justification or excuse, has 
                failed to enforce compliance with any such provision or 
                rule, or any professional standard by a registered 
                public accounting firm or an associated person thereof.
            (3) Censure of board members; removal from office.--The 
        Commission may, as necessary or appropriate in the public 
        interest, for the protection of investors, or otherwise in 
        furtherance of the purposes of this Act or the securities laws, 
        remove

[[Page 116 STAT. 768]]

        from office or censure any member of the Board, if the 
        Commission finds, on the record, after notice and opportunity 
        for a hearing, that such member--
                    (A) has willfully violated any provision of this 
                Act, the rules of the Board, or the securities laws;
                    (B) has willfully abused the authority of that 
                member; or
                    (C) without reasonable justification or excuse, has 
                failed to enforce compliance with any such provision or 
                rule, or any professional standard by any registered 
                public accounting firm or any associated person thereof.

SEC. 108. ACCOUNTING <<NOTE: 15 USC 7218.>> STANDARDS.

    (a) Amendment to Securities Act of 1933.--Section 19 of the 
Securities Act of 1933 (15 U.S.C. 77s) is amended--
            (1) by redesignating subsections (b) and (c) as subsections 
        (c) and (d), respectively; and
            (2) by inserting after subsection (a) the following:

    ``(b) Recognition of Accounting Standards.--
            ``(1) In general.--In carrying out its authority under 
        subsection (a) and under section 13(b) of the Securities 
        Exchange Act of 1934, the Commission may recognize, as 
        `generally accepted' for purposes of the securities laws, any 
        accounting principles established by a standard setting body--
                    ``(A) that--
                          ``(i) is organized as a private entity;
                          ``(ii) has, for administrative and operational 
                      purposes, a board of trustees (or equivalent body) 
                      serving in the public interest, the majority of 
                      whom are not, concurrent with their service on 
                      such board, and have not been during the 2-year 
                      period preceding such service, associated persons 
                      of any registered public accounting firm;
                          ``(iii) is funded as provided in section 109 
                      of the Sarbanes-Oxley Act of 2002;
                          ``(iv) has adopted procedures to ensure prompt 
                      consideration, by majority vote of its members, of 
                      changes to accounting principles necessary to 
                      reflect emerging accounting issues and changing 
                      business practices; and
                          ``(v) considers, in adopting accounting 
                      principles, the need to keep standards current in 
                      order to reflect changes in the business 
                      environment, the extent to which international 
                      convergence on high quality accounting standards 
                      is necessary or appropriate in the public interest 
                      and for the protection of investors; and
                    ``(B) that the Commission determines has the 
                capacity to assist the Commission in fulfilling the 
                requirements of subsection (a) and section 13(b) of the 
                Securities Exchange Act of 1934, because, at a minimum, 
                the standard setting body is capable of improving the 
                accuracy and effectiveness of financial reporting and 
                the protection of investors under the securities laws.

[[Page 116 STAT. 769]]

            ``(2) Annual report.--A standard setting body described in 
        paragraph (1) shall submit an annual report to the Commission 
        and the public, containing audited financial statements of that 
        standard setting body.''.

    (b) Commission Authority.--The <<NOTE: Regulations.>> Commission 
shall promulgate such rules and regulations to carry out section 19(b) 
of the Securities Act of 1933, as added by this section, as it deems 
necessary or appropriate in the public interest or for the protection of 
investors.

    (c) No Effect on Commission Powers.--Nothing in this Act, including 
this section and the amendment made by this section, shall be construed 
to impair or limit the authority of the Commission to establish 
accounting principles or standards for purposes of enforcement of the 
securities laws.
    (d) Study and Report on Adopting Principles-Based Accounting.--
            (1) Study.--
                    (A) In general.--The Commission shall conduct a 
                study on the adoption by the United States financial 
                reporting system of a principles-based accounting 
                system.
                    (B) Study topics.--The study required by 
                subparagraph (A) shall include an examination of--
                          (i) the extent to which principles-based 
                      accounting and financial reporting exists in the 
                      United States;
                          (ii) the length of time required for change 
                      from a rules-based to a principles-based financial 
                      reporting system;
                          (iii) the feasibility of and proposed methods 
                      by which a principles-based system may be 
                      implemented; and
                          (iv) a thorough economic analysis of the 
                      implementation of a principles-based system.
            (2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Commission shall submit a report on 
        the results of the study required by paragraph (1) to the 
        Committee on Banking, Housing, and Urban Affairs of the Senate 
        and the Committee on Financial Services of the House of 
        Representatives.

SEC. 109. <<NOTE: 15 USC 7219.>> FUNDING.

    (a) In General.--The Board, and the standard setting body designated 
pursuant to section 19(b) of the Securities Act of 1933, as amended by 
section 108, shall be funded as provided in this section.
    (b) Annual Budgets.--The Board and the standard setting body 
referred to in subsection (a) shall each establish a budget for each 
fiscal year, which shall be reviewed and approved according to their 
respective internal procedures not less than 1 month prior to the 
commencement of the fiscal year to which the budget pertains (or at the 
beginning of the Board's first fiscal year, which may be a short fiscal 
year). The budget of the Board shall be subject to approval by the 
Commission. The budget for the first fiscal year of the Board shall be 
prepared and approved promptly following the appointment of the initial 
five Board members, to permit action by the Board of the organizational 
tasks contemplated by section 101(d).
    (c) Sources and Uses of Funds.--

[[Page 116 STAT. 770]]

            (1) Recoverable budget expenses.--The budget of the Board 
        (reduced by any registration or annual fees received under 
        section 102(e) for the year preceding the year for which the 
        budget is being computed), and all of the budget of the standard 
        setting body referred to in subsection (a), for each fiscal year 
        of each of those 2 entities, shall be payable from annual 
        accounting support fees, in accordance with subsections (d) and 
        (e). Accounting support fees and other receipts of the Board and 
        of such standard-setting body shall not be considered public 
        monies of the United States.
            (2) Funds generated from the collection of monetary 
        penalties.--Subject to the availability in advance in an 
        appropriations Act, and notwithstanding subsection (i), all 
        funds collected by the Board as a result of the assessment of 
        monetary penalties shall be used to fund a merit scholarship 
        program for undergraduate and graduate students enrolled in 
        accredited accounting degree programs, which program is to be 
        administered by the Board or by an entity or agent identified by 
        the Board.

    (d) Annual Accounting Support Fee for the Board.--
            (1) Establishment of fee.--The Board shall establish, with 
        the approval of the Commission, a reasonable annual accounting 
        support fee (or a formula for the computation thereof), as may 
        be necessary or appropriate to establish and maintain the Board. 
        Such fee may also cover costs incurred in the Board's first 
        fiscal year (which may be a short fiscal year), or may be levied 
        separately with respect to such short fiscal year.
            (2) Assessments.--The rules of the Board under paragraph (1) 
        shall provide for the equitable allocation, assessment, and 
        collection by the Board (or an agent appointed by the Board) of 
        the fee established under paragraph (1), among issuers, in 
        accordance with subsection (g), allowing for differentiation 
        among classes of issuers, as appropriate.

    (e) Annual Accounting Support Fee for Standard Setting Body.--The 
annual accounting support fee for the standard setting body referred to 
in subsection (a)--
            (1) shall be allocated in accordance with subsection (g), 
        and assessed and collected against each issuer, on behalf of the 
        standard setting body, by 1 or more appropriate designated 
        collection agents, as may be necessary or appropriate to pay for 
        the budget and provide for the expenses of that standard setting 
        body, and to provide for an independent, stable source of 
        funding for such body, subject to review by the Commission; and
            (2) may differentiate among different classes of issuers.

    (f) Limitation on Fee.--The amount of fees collected under this 
section for a fiscal year on behalf of the Board or the standards 
setting body, as the case may be, shall not exceed the recoverable 
budget expenses of the Board or body, respectively (which may include 
operating, capital, and accrued items), referred to in subsection 
(c)(1).
    (g) Allocation of Accounting Support Fees Among Issuers.--Any amount 
due from issuers (or a particular class of issuers) under this section 
to fund the budget of the Board or the standard setting body referred to 
in subsection (a) shall be allocated among and payable by each issuer 
(or each issuer in

[[Page 116 STAT. 771]]

a particular class, as applicable) in an amount equal to the total of 
such amount, multiplied by a fraction--
            (1) the numerator of which is the average monthly equity 
        market capitalization of the issuer for the 12-month period 
        immediately preceding the beginning of the fiscal year to which 
        such budget relates; and
            (2) the denominator of which is the average monthly equity 
        market capitalization of all such issuers for such 12-month 
        period.

    (h) Conforming Amendments.--Section 13(b)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m(b)(2)) is amended--
            (1) in subparagraph (A), by striking ``and'' at the end; and
            (2) in subparagraph (B), by striking the period at the end 
        and inserting the following: ``; and
            ``(C) notwithstanding any other provision of law, pay the 
        allocable share of such issuer of a reasonable annual accounting 
        support fee or fees, determined in accordance with section 109 
        of the Sarbanes-Oxley Act of 2002.''.

    (i) Rule of Construction.--Nothing in this section shall be 
construed to render either the Board, the standard setting body referred 
to in subsection (a), or both, subject to procedures in Congress to 
authorize or appropriate public funds, or to prevent such organization 
from utilizing additional sources of revenue for its activities, such as 
earnings from publication sales, provided that each additional source of 
revenue shall not jeopardize, in the judgment of the Commission, the 
actual and perceived independence of such organization.
    (j) Start-Up Expenses of the Board.--From the unexpended balances of 
the appropriations to the Commission for fiscal year 2003, the Secretary 
of the Treasury is authorized to advance to the Board not to exceed the 
amount necessary to cover the expenses of the Board during its first 
fiscal year (which may be a short fiscal year).

                     TITLE II--AUDITOR INDEPENDENCE

SEC. 201. SERVICES OUTSIDE THE SCOPE OF PRACTICE OF AUDITORS.

    (a) Prohibited Activities.--Section 10A of the Securities Exchange 
Act of 1934 (15 U.S.C. 78j-1) is amended by adding at the end the 
following:
    ``(g) Prohibited Activities.--Except as provided in subsection (h), 
it shall be unlawful for a registered public accounting firm (and any 
associated person of that firm, to the extent determined appropriate by 
the Commission) that performs for any issuer any audit required by this 
title or the rules of the Commission under this title or, beginning 180 
days after the date of commencement of the operations of the Public 
Company Accounting Oversight Board established under section 101 of the 
Sarbanes-Oxley Act of 2002 (in this section referred to as the `Board'), 
the rules of the Board, to provide to that issuer, contemporaneously 
with the audit, any non-audit service, including--
            ``(1) bookkeeping or other services related to the 
        accounting records or financial statements of the audit client;
            ``(2) financial information systems design and 
        implementation;

[[Page 116 STAT. 772]]

            ``(3) appraisal or valuation services, fairness opinions, or 
        contribution-in-kind reports;
            ``(4) actuarial services;
            ``(5) internal audit outsourcing services;
            ``(6) management functions or human resources;
            ``(7) broker or dealer, investment adviser, or investment 
        banking services;
            ``(8) legal services and expert services unrelated to the 
        audit; and
            ``(9) any other service that the Board determines, by 
        regulation, is impermissible.

    ``(h) Preapproval Required for Non-Audit Services.--A registered 
public accounting firm may engage in any non-audit service, including 
tax services, that is not described in any of paragraphs (1) through (9) 
of subsection (g) for an audit client, only if the activity is approved 
in advance by the audit committee of the issuer, in accordance with 
subsection (i).''.
    (b) Exemption <<NOTE: 15 USC 7231.>> Authority.--The Board may, on a 
case by case basis, exempt any person, issuer, public accounting firm, 
or transaction from the prohibition on the provision of services under 
section 10A(g) of the Securities Exchange Act of 1934 (as added by this 
section), to the extent that such exemption is necessary or appropriate 
in the public interest and is consistent with the protection of 
investors, and subject to review by the Commission in the same manner as 
for rules of the Board under section 107.

SEC. 202. PREAPPROVAL REQUIREMENTS.

    Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78j-
1), as amended by this Act, is amended by adding at the end the 
following:
    ``(i) Preapproval Requirements.--
            ``(1) In general.--
                    ``(A) Audit committee action.--All auditing services 
                (which may entail providing comfort letters in 
                connection with securities underwritings or statutory 
                audits required for insurance companies for purposes of 
                State law) and non-audit services, other than as 
                provided in subparagraph (B), provided to an issuer by 
                the auditor of the issuer shall be preapproved by the 
                audit committee of the issuer.
                    ``(B) De minimus exception.--The preapproval 
                requirement under subparagraph (A) is waived with 
                respect to the provision of non-audit services for an 
                issuer, if--
                          ``(i) the aggregate amount of all such non-
                      audit services provided to the issuer constitutes 
                      not more than 5 percent of the total amount of 
                      revenues paid by the issuer to its auditor during 
                      the fiscal year in which the nonaudit services are 
                      provided;
                          ``(ii) such services were not recognized by 
                      the issuer at the time of the engagement to be 
                      non-audit services; and
                          ``(iii) such services are promptly brought to 
                      the attention of the audit committee of the issuer 
                      and approved prior to the completion of the audit 
                      by the audit committee or by 1 or more members of 
                      the audit committee who are members of the board 
                      of directors to whom authority to grant such 
                      approvals has been delegated by the audit 
                      committee.

[[Page 116 STAT. 773]]

            ``(2) Disclosure to investors.--Approval by an audit 
        committee of an issuer under this subsection of a non-audit 
        service to be performed by the auditor of the issuer shall be 
        disclosed to investors in periodic reports required by section 
        13(a).
            ``(3) Delegation authority.--The audit committee of an 
        issuer may delegate to 1 or more designated members of the audit 
        committee who are independent directors of the board of 
        directors, the authority to grant preapprovals required by this 
        subsection. The decisions of any member to whom authority is 
        delegated under this paragraph to preapprove an activity under 
        this subsection shall be presented to the full audit committee 
        at each of its scheduled meetings.
            ``(4) Approval of audit services for other purposes.--In 
        carrying out its duties under subsection (m)(2), if the audit 
        committee of an issuer approves an audit service within the 
        scope of the engagement of the auditor, such audit service shall 
        be deemed to have been preapproved for purposes of this 
        subsection.''.

SEC. 203. AUDIT PARTNER ROTATION.

    Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78j-
1), as amended by this Act, is amended by adding at the end the 
following:
    ``(j) Audit Partner Rotation.--It shall be unlawful for a registered 
public accounting firm to provide audit services to an issuer if the 
lead (or coordinating) audit partner (having primary responsibility for 
the audit), or the audit partner responsible for reviewing the audit, 
has performed audit services for that issuer in each of the 5 previous 
fiscal years of that issuer.''.

SEC. 204. AUDITOR REPORTS TO AUDIT COMMITTEES.

    Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78j-
1), as amended by this Act, is amended by adding at the end the 
following:
    ``(k) Reports to Audit Committees.--Each registered public 
accounting firm that performs for any issuer any audit required by this 
title shall timely report to the audit committee of the issuer--
            ``(1) all critical accounting policies and practices to be 
        used;
            ``(2) all alternative treatments of financial information 
        within generally accepted accounting principles that have been 
        discussed with management officials of the issuer, ramifications 
        of the use of such alternative disclosures and treatments, and 
        the treatment preferred by the registered public accounting 
        firm; and
            ``(3) other material written communications between the 
        registered public accounting firm and the management of the 
        issuer, such as any management letter or schedule of unadjusted 
        differences.''.

SEC. 205. CONFORMING AMENDMENTS.

    (a) Definitions.--Section 3(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following:
            ``(58) Audit committee.--The term `audit committee' means--
                    ``(A) a committee (or equivalent body) established 
                by and amongst the board of directors of an issuer for 
                the

[[Page 116 STAT. 774]]

                purpose of overseeing the accounting and financial 
                reporting processes of the issuer and audits of the 
                financial statements of the issuer; and
                    ``(B) if no such committee exists with respect to an 
                issuer, the entire board of directors of the issuer.
            ``(59) Registered public accounting firm.--The term 
        `registered public accounting firm' has the same meaning as in 
        section 2 of the Sarbanes-Oxley Act of 2002.''.

    (b) Auditor Requirements.--Section 10A of the Securities Exchange 
Act of 1934 (15 U.S.C. 78j-1) is amended--
            (1) by striking ``an independent public accountant'' each 
        place that term appears and inserting ``a registered public 
        accounting firm'';
            (2) by striking ``the independent public accountant'' each 
        place that term appears and inserting ``the registered public 
        accounting firm'';
            (3) in subsection (c), by striking ``No independent public 
        accountant'' and inserting ``No registered public accounting 
        firm''; and
            (4) in subsection (b)--
                    (A) by striking ``the accountant'' each place that 
                term appears and inserting ``the firm'';
                    (B) by striking ``such accountant'' each place that 
                term appears and inserting ``such firm''; and
                    (C) in paragraph (4), by striking ``the accountant's 
                report'' and inserting ``the report of the firm''.

    (c) Other References.--The Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.) is amended--
            (1) in section 12(b)(1) (15 U.S.C. 78l(b)(1)), by striking 
        ``independent public accountants'' each place that term appears 
        and inserting ``a registered public accounting firm''; and
            (2) in subsections (e) and (i) of section 17 (15 U.S.C. 
        78q), by striking ``an independent public accountant'' each 
        place that term appears and inserting ``a registered public 
        accounting firm''.

    (d) Conforming Amendment.--Section 10A(f) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78k(f)) <<NOTE: 15 USC 78j-1.>>  is amended--
            (1) by striking ``Definition'' and inserting 
        ``Definitions''; and
            (2) by adding at the end the following: ``As used in this 
        section, the term `issuer' means an issuer (as defined in 
        section 3), the securities of which are registered under section 
        12, or that is required to file reports pursuant to section 
        15(d), or that files or has filed a registration statement that 
        has not yet become effective under the Securities Act of 1933 
        (15 U.S.C. 77a et seq.), and that it has not withdrawn.''.

SEC. 206. CONFLICTS OF INTEREST.

    Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78j-
1), as amended by this Act, is amended by adding at the end the 
following:
    ``(l) Conflicts of Interest.--It shall be unlawful for a registered 
public accounting firm to perform for an issuer any audit service 
required by this title, if a chief executive officer, controller, chief 
financial officer, chief accounting officer, or any person serving in an 
equivalent position for the issuer, was employed by that registered 
independent public accounting firm and participated in

[[Page 116 STAT. 775]]

any capacity in the audit of that issuer during the 1-year period 
preceding the date of the initiation of the audit.''.

SEC. 207. <<NOTE: 15 USC 7232.>> STUDY OF MANDATORY ROTATION OF 
            REGISTERED PUBLIC ACCOUNTING FIRMS.

    (a) Study and Review Required.--The Comptroller General of the 
United States shall conduct a study and review of the potential effects 
of requiring the mandatory rotation of registered public accounting 
firms.
    (b) Report Required.--Not <<NOTE: Deadline.>> later than 1 year 
after the date of enactment of this Act, the Comptroller General shall 
submit a report to the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee on Financial Services of the House of 
Representatives on the results of the study and review required by this 
section.

    (c) Definition.--For purposes of this section, the term ``mandatory 
rotation'' refers to the imposition of a limit on the period of years in 
which a particular registered public accounting firm may be the auditor 
of record for a particular issuer.

SEC. 208. <<NOTE: 15 USC 7233.>> COMMISSION AUTHORITY.

    (a) Commission Regulations.-- <<NOTE: Deadline.>> Not later than 180 
days after the date of enactment of this Act, the Commission shall issue 
final regulations to carry out each of subsections (g) through (l) of 
section 10A of the Securities Exchange Act of 1934, as added by this 
title.

    (b) Auditor Independence.--It shall be unlawful for any registered 
public accounting firm (or an associated person thereof, as applicable) 
to prepare or issue any audit report with respect to any issuer, if the 
firm or associated person engages in any activity with respect to that 
issuer prohibited by any of subsections (g) through (l) of section 10A 
of the Securities Exchange Act of 1934, as added by this title, or any 
rule or regulation of the Commission or of the Board issued thereunder.

SEC. 209. <<NOTE: 15 USC 7234.>> CONSIDERATIONS BY APPROPRIATE STATE 
            REGULATORY AUTHORITIES.

    In supervising nonregistered public accounting firms and their 
associated persons, appropriate State regulatory authorities should make 
an independent determination of the proper standards applicable, 
particularly taking into consideration the size and nature of the 
business of the accounting firms they supervise and the size and nature 
of the business of the clients of those firms. The standards applied by 
the Board under this Act should not be presumed to be applicable for 
purposes of this section for small and medium sized nonregistered public 
accounting firms.

                   TITLE III--CORPORATE RESPONSIBILITY

SEC. 301. PUBLIC COMPANY AUDIT COMMITTEES.

    Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78f) 
is amended <<NOTE: 15 USC 78j-1.>> by adding at the end the following:

    ``(m) Standards Relating to Audit Committees.--
            ``(1) Commission rules.--

[[Page 116 STAT. 776]]

                    ``(A) In general.--Effective <<NOTE: Deadline.>> not 
                later than 270 days after the date of enactment of this 
                subsection, the Commission shall, by rule, direct the 
                national securities exchanges and national securities 
                associations to prohibit the listing of any security of 
                an issuer that is not in compliance with the 
                requirements of any portion of paragraphs (2) through 
                (6).
                    ``(B) Opportunity to cure defects.--The rules of the 
                Commission under subparagraph (A) shall provide for 
                appropriate procedures for an issuer to have an 
                opportunity to cure any defects that would be the basis 
                for a prohibition under subparagraph (A), before the 
                imposition of such prohibition.
            ``(2) Responsibilities relating to registered public 
        accounting firms.--The audit committee of each issuer, in its 
        capacity as a committee of the board of directors, shall be 
        directly responsible for the appointment, compensation, and 
        oversight of the work of any registered public accounting firm 
        employed by that issuer (including resolution of disagreements 
        between management and the auditor regarding financial 
        reporting) for the purpose of preparing or issuing an audit 
        report or related work, and each such registered public 
        accounting firm shall report directly to the audit committee.
            ``(3) Independence.--
                    ``(A) In general.--Each member of the audit 
                committee of the issuer shall be a member of the board 
                of directors of the issuer, and shall otherwise be 
                independent.
                    ``(B) Criteria.--In order to be considered to be 
                independent for purposes of this paragraph, a member of 
                an audit committee of an issuer may not, other than in 
                his or her capacity as a member of the audit committee, 
                the board of directors, or any other board committee--
                          ``(i) accept any consulting, advisory, or 
                      other compensatory fee from the issuer; or
                          ``(ii) be an affiliated person of the issuer 
                      or any subsidiary thereof.
                    ``(C) Exemption authority.--The Commission may 
                exempt from the requirements of subparagraph (B) a 
                particular relationship with respect to audit committee 
                members, as the Commission determines appropriate in 
                light of the circumstances.
            ``(4) Complaints.--Each audit committee shall establish 
        procedures for--
                    ``(A) the receipt, retention, and treatment of 
                complaints received by the issuer regarding accounting, 
                internal accounting controls, or auditing matters; and
                    ``(B) the confidential, anonymous submission by 
                employees of the issuer of concerns regarding 
                questionable accounting or auditing matters.
            ``(5) Authority to engage advisers.--Each audit committee 
        shall have the authority to engage independent counsel and other 
        advisers, as it determines necessary to carry out its duties.
            ``(6) Funding.--Each issuer shall provide for appropriate 
        funding, as determined by the audit committee, in its capacity 
        as a committee of the board of directors, for payment of 
        compensation--

[[Page 116 STAT. 777]]

                    ``(A) to the registered public accounting firm 
                employed by the issuer for the purpose of rendering or 
                issuing an audit report; and
                    ``(B) to any advisers employed by the audit 
                committee under paragraph (5).''.

SEC. 302. <<NOTE: 15 USC 7241.>> CORPORATE RESPONSIBILITY FOR FINANCIAL 
            REPORTS.

    (a) Regulations Required.--The Commission shall, by rule, require, 
for each company filing periodic reports under section 13(a) or 15(d) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)), that the 
principal executive officer or officers and the principal financial 
officer or officers, or persons performing similar functions, certify in 
each annual or quarterly report filed or submitted under either such 
section of such Act that--
            (1) the signing officer has reviewed the report;
            (2) based on the officer's knowledge, the report does not 
        contain any untrue statement of a material fact or omit to state 
        a material fact necessary in order to make the statements made, 
        in light of the circumstances under which such statements were 
        made, not misleading;
            (3) based on such officer's knowledge, the financial 
        statements, and other financial information included in the 
        report, fairly present in all material respects the financial 
        condition and results of operations of the issuer as of, and 
        for, the periods presented in the report;
            (4) the signing officers--
                    (A) are responsible for establishing and maintaining 
                internal controls;
                    (B) have designed such internal controls to ensure 
                that material information relating to the issuer and its 
                consolidated subsidiaries is made known to such officers 
                by others within those entities, particularly during the 
                period in which the periodic reports are being prepared;
                    (C) have evaluated the effectiveness of the issuer's 
                internal controls as of a date within 90 days prior to 
                the report; and
                    (D) have presented in the report their conclusions 
                about the effectiveness of their internal controls based 
                on their evaluation as of that date;
            (5) the signing officers have disclosed to the issuer's 
        auditors and the audit committee of the board of directors (or 
        persons fulfilling the equivalent function)--
                    (A) all significant deficiencies in the design or 
                operation of internal controls which could adversely 
                affect the issuer's ability to record, process, 
                summarize, and report financial data and have identified 
                for the issuer's auditors any material weaknesses in 
                internal controls; and
                    (B) any fraud, whether or not material, that 
                involves management or other employees who have a 
                significant role in the issuer's internal controls; and
            (6) the signing officers have indicated in the report 
        whether or not there were significant changes in internal 
        controls or in other factors that could significantly affect 
        internal controls subsequent to the date of their evaluation, 
        including any corrective actions with regard to significant 
        deficiencies and material weaknesses.

[[Page 116 STAT. 778]]

    (b) Foreign Reincorporations Have No Effect.--Nothing in this 
section 302 shall be interpreted or applied in any way to allow any 
issuer to lessen the legal force of the statement required under this 
section 302, by an issuer having reincorporated or having engaged in any 
other transaction that resulted in the transfer of the corporate 
domicile or offices of the issuer from inside the United States to 
outside of the United States.
    (c) Deadline.--The rules required by subsection (a) shall be 
effective not later than 30 days after the date of enactment of this 
Act.

SEC. 303. <<NOTE: 15 USC 7242.>> IMPROPER INFLUENCE ON CONDUCT OF 
            AUDITS.

    (a) Rules To Prohibit.--It shall be unlawful, in contravention of 
such rules or regulations as the Commission shall prescribe as necessary 
and appropriate in the public interest or for the protection of 
investors, for any officer or director of an issuer, or any other person 
acting under the direction thereof, to take any action to fraudulently 
influence, coerce, manipulate, or mislead any independent public or 
certified accountant engaged in the performance of an audit of the 
financial statements of that issuer for the purpose of rendering such 
financial statements materially misleading.
    (b) Enforcement.--In any civil proceeding, the Commission shall have 
exclusive authority to enforce this section and any rule or regulation 
issued under this section.
    (c) No Preemption of Other Law.--The provisions of subsection (a) 
shall be in addition to, and shall not supersede or preempt, any other 
provision of law or any rule or regulation issued thereunder.
    (d) Deadline for Rulemaking.--The Commission shall--
            (1) propose the rules or regulations required by this 
        section, not later than 90 days after the date of enactment of 
        this Act; and
            (2) issue final rules or regulations required by this 
        section, not later than 270 days after that date of enactment.

SEC. 304. <<NOTE: 15 USC 7243.>> FORFEITURE OF CERTAIN BONUSES AND 
            PROFITS.

    (a) Additional Compensation Prior to Noncompliance With Commission 
Financial Reporting Requirements.--If an issuer is required to prepare 
an accounting restatement due to the material noncompliance of the 
issuer, as a result of misconduct, with any financial reporting 
requirement under the securities laws, the chief executive officer and 
chief financial officer of the issuer shall reimburse the issuer for--
            (1) any bonus or other incentive-based or equity-based 
        compensation received by that person from the issuer during the 
        12-month period following the first public issuance or filing 
        with the Commission (whichever first occurs) of the financial 
        document embodying such financial reporting requirement; and
            (2) any profits realized from the sale of securities of the 
        issuer during that 12-month period.

    (b) Commission Exemption Authority.--The Commission may exempt any 
person from the application of subsection (a), as it deems necessary and 
appropriate.

SEC. 305. OFFICER AND DIRECTOR BARS AND PENALTIES.

    (a) Unfitness Standard.--

[[Page 116 STAT. 779]]

            (1) Securities exchange act of 1934.--Section 21(d)(2) of 
        the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(2)) is 
        amended by striking ``substantial unfitness'' and inserting 
        ``unfitness''.
            (2) Securities act of 1933.--Section 20(e) of the Securities 
        Act of 1933 (15 U.S.C. 77t(e)) is amended by striking 
        ``substantial unfitness'' and inserting ``unfitness''.

    (b) Equitable Relief.--Section 21(d) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78u(d)) is amended by adding at the end the 
following:
    ``(5) Equitable Relief.--In any action or proceeding brought or 
instituted by the Commission under any provision of the securities laws, 
the Commission may seek, and any Federal court may grant, any equitable 
relief that may be appropriate or necessary for the benefit of 
investors.''.

SEC. 306. <<NOTE: 15 USC 7244.>> INSIDER TRADES DURING PENSION FUND 
            BLACKOUT PERIODS.

    (a) Prohibition of Insider Trading During Pension Fund Blackout 
Periods.--
            (1) In general.--Except to the extent otherwise provided by 
        rule of the Commission pursuant to paragraph (3), it shall be 
        unlawful for any director or executive officer of an issuer of 
        any equity security (other than an exempted security), directly 
        or indirectly, to purchase, sell, or otherwise acquire or 
        transfer any equity security of the issuer (other than an 
        exempted security) during any blackout period with respect to 
        such equity security if such director or officer acquires such 
        equity security in connection with his or her service or 
        employment as a director or executive officer.
            (2) Remedy.--
                    (A) In general.--Any profit realized by a director 
                or executive officer referred to in paragraph (1) from 
                any purchase, sale, or other acquisition or transfer in 
                violation of this subsection shall inure to and be 
                recoverable by the issuer, irrespective of any intention 
                on the part of such director or executive officer in 
                entering into the transaction.
                    (B) Actions to recover profits.--An action to 
                recover profits in accordance with this subsection may 
                be instituted at law or in equity in any court of 
                competent jurisdiction by the issuer, or by the owner of 
                any security of the issuer in the name and in behalf of 
                the issuer if the issuer fails or refuses to bring such 
                action within 60 days after the date of request, or 
                fails diligently to prosecute the action thereafter, 
                except that no such suit shall be brought more than 2 
                years after the date on which such profit was realized.
            (3) Rulemaking Authorized.--The Commission shall, in 
        consultation with the Secretary of Labor, issue rules to clarify 
        the application of this subsection and to prevent evasion 
        thereof. Such rules shall provide for the application of the 
        requirements of paragraph (1) with respect to entities treated 
        as a single employer with respect to an issuer under section 
        414(b), (c), (m), or (o) of the Internal Revenue Code of 1986 to 
        the extent necessary to clarify the application of such 
        requirements and to prevent evasion thereof. Such rules may also 
        provide for

[[Page 116 STAT. 780]]

        appropriate exceptions from the requirements of this subsection, 
        including exceptions for purchases pursuant to an automatic 
        dividend reinvestment program or purchases or sales made 
        pursuant to an advance election.
            (4) Blackout period.--For purposes of this subsection, the 
        term ``blackout period'', with respect to the equity securities 
        of any issuer--
                    (A) means any period of more than 3 consecutive 
                business days during which the ability of not fewer than 
                50 percent of the participants or beneficiaries under 
                all individual account plans maintained by the issuer to 
                purchase, sell, or otherwise acquire or transfer an 
                interest in any equity of such issuer held in such an 
                individual account plan is temporarily suspended by the 
                issuer or by a fiduciary of the plan; and
                    (B) does not include, under regulations which shall 
                be prescribed by the Commission--
                          (i) a regularly scheduled period in which the 
                      participants and beneficiaries may not purchase, 
                      sell, or otherwise acquire or transfer an interest 
                      in any equity of such issuer, if such period is--
                                    (I) incorporated into the individual 
                                account plan; and
                                    (II) timely disclosed to employees 
                                before becoming participants under the 
                                individual account plan or as a 
                                subsequent amendment to the plan; or
                          (ii) any suspension described in subparagraph 
                      (A) that is imposed solely in connection with 
                      persons becoming participants or beneficiaries, or 
                      ceasing to be participants or beneficiaries, in an 
                      individual account plan by reason of a corporate 
                      merger, acquisition, divestiture, or similar 
                      transaction involving the plan or plan sponsor.
            (5) Individual account plan.--For purposes of this 
        subsection, the term ``individual account plan'' has the meaning 
        provided in section 3(34) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(34), except that such term 
        shall not include a one-participant retirement plan (within the 
        meaning of section 101(i)(8)(B) of such Act (29 U.S.C. 
        1021(i)(8)(B))).
            (6) Notice to directors, executive officers, and the 
        commission.--In any case in which a director or executive 
        officer is subject to the requirements of this subsection in 
        connection with a blackout period (as defined in paragraph (4)) 
        with respect to any equity securities, the issuer of such equity 
        securities shall timely notify such director or officer and the 
        Securities and Exchange Commission of such blackout period.

    (b) Notice Requirements to Participants and Beneficiaries under 
ERISA.--
            (1) In general.--Section 101 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1021) is amended by 
        redesignating the second subsection (h) as subsection (j), and 
        by inserting after the first subsection (h) the following new 
        subsection:

[[Page 116 STAT. 781]]

    ``(i) Notice of Blackout Periods to Participant or Beneficiary Under 
Individual Account Plan.--
            ``(1) Duties of plan administrator.--In advance of the 
        commencement of any blackout period with respect to an 
        individual account plan, the plan administrator shall notify the 
        plan participants and beneficiaries who are affected by such 
        action in accordance with this subsection.
            ``(2) Notice requirements.--
                    ``(A) In general.--The notices described in 
                paragraph (1) shall be written in a manner calculated to 
                be understood by the average plan participant and shall 
                include--
                          ``(i) the reasons for the blackout period,
                          ``(ii) an identification of the investments 
                      and other rights affected,
                          ``(iii) the expected beginning date and length 
                      of the blackout period,
                          ``(iv) in the case of investments affected, a 
                      statement that the participant or beneficiary 
                      should evaluate the appropriateness of their 
                      current investment decisions in light of their 
                      inability to direct or diversify assets credited 
                      to their accounts during the blackout period, and
                          ``(v) such other matters as the Secretary may 
                      require by regulation.
                    ``(B) Notice to participants and beneficiaries.--
                Except as otherwise provided in this subsection, notices 
                described in paragraph (1) shall be furnished to all 
                participants and beneficiaries under the plan to whom 
                the blackout period applies at least 30 days in advance 
                of the blackout period.
                    ``(C) Exception to 30-day notice requirement.--In 
                any case in which--
                          ``(i) a deferral of the blackout period would 
                      violate the requirements of subparagraph (A) or 
                      (B) of section 404(a)(1), and a fiduciary of the 
                      plan reasonably so determines in writing, or
                          ``(ii) the inability to provide the 30-day 
                      advance notice is due to events that were 
                      unforeseeable or circumstances beyond the 
                      reasonable control of the plan administrator, and 
                      a fiduciary of the plan reasonably so determines 
                      in writing,
                subparagraph (B) shall not apply, and the notice shall 
                be furnished to all participants and beneficiaries under 
                the plan to whom the blackout period applies as soon as 
                reasonably possible under the circumstances unless such 
                a notice in advance of the termination of the blackout 
                period is impracticable.
                    ``(D) Written notice.--The notice required to be 
                provided under this subsection shall be in writing, 
                except that such notice may be in electronic or other 
                form to the extent that such form is reasonably 
                accessible to the recipient.
                    ``(E) Notice to issuers of employer securities 
                subject to blackout period.--In the case of any blackout 
                period in connection with an individual account plan, 
                the plan administrator shall provide timely notice of 
                such

[[Page 116 STAT. 782]]

                blackout period to the issuer of any employer securities 
                subject to such blackout period.
            ``(3) Exception for blackout periods with limited 
        applicability.--In any case in which the blackout period applies 
        only to 1 or more participants or beneficiaries in connection 
        with a merger, acquisition, divestiture, or similar transaction 
        involving the plan or plan sponsor and occurs solely in 
        connection with becoming or ceasing to be a participant or 
        beneficiary under the plan by reason of such merger, 
        acquisition, divestiture, or transaction, the requirement of 
        this subsection that the notice be provided to all participants 
        and beneficiaries shall be treated as met if the notice required 
        under paragraph (1) is provided to such participants or 
        beneficiaries to whom the blackout period applies as soon as 
        reasonably practicable.
            ``(4) Changes in length of blackout period.--If, following 
        the furnishing of the notice pursuant to this subsection, there 
        is a change in the beginning date or length of the blackout 
        period (specified in such notice pursuant to paragraph 
        (2)(A)(iii)), the administrator shall provide affected 
        participants and beneficiaries notice of the change as soon as 
        reasonably practicable. In relation to the extended blackout 
        period, such notice shall meet the requirements of paragraph 
        (2)(D) and shall specify any material change in the matters 
        referred to in clauses (i) through (v) of paragraph (2)(A).
            ``(5) Regulatory exceptions.--The Secretary may provide by 
        regulation for additional exceptions to the requirements of this 
        subsection which the Secretary determines are in the interests 
        of participants and beneficiaries.
            ``(6) Guidance and model notices.--The Secretary shall issue 
        guidance and model notices which meet the requirements of this 
        subsection.
            ``(7) Blackout period.--For purposes of this subsection--
                    ``(A) In general.--The term `blackout period' means, 
                in connection with an individual account plan, any 
                period for which any ability of participants or 
                beneficiaries under the plan, which is otherwise 
                available under the terms of such plan, to direct or 
                diversify assets credited to their accounts, to obtain 
                loans from the plan, or to obtain distributions from the 
                plan is temporarily suspended, limited, or restricted, 
                if such suspension, limitation, or restriction is for 
                any period of more than 3 consecutive business days.
                    ``(B) Exclusions.--The term `blackout period' does 
                not include a suspension, limitation, or restriction--
                          ``(i) which occurs by reason of the 
                      application of the securities laws (as defined in 
                      section 3(a)(47) of the Securities Exchange Act of 
                      1934),
                          ``(ii) which is a change to the plan which 
                      provides for a regularly scheduled suspension, 
                      limitation, or restriction which is disclosed to 
                      participants or beneficiaries through any summary 
                      of material modifications, any materials 
                      describing specific investment alternatives under 
                      the plan, or any changes thereto, or
                          ``(iii) which applies only to 1 or more 
                      individuals, each of whom is the participant, an 
                      alternate payee

[[Page 116 STAT. 783]]

                      (as defined in section 206(d)(3)(K)), or any other 
                      beneficiary pursuant to a qualified domestic 
                      relations order (as defined in section 
                      206(d)(3)(B)(i)).
            ``(8) Individual account plan.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `individual account plan' shall have the 
                meaning provided such term in section 3(34), except that 
                such term shall not include a one-participant retirement 
                plan.
                    ``(B) One-participant retirement plan.--For purposes 
                of subparagraph (A), the term `one-participant 
                retirement plan' means a retirement plan that--
                          ``(i) on the first day of the plan year--
                                    ``(I) covered only the employer (and 
                                the employer's spouse) and the employer 
                                owned the entire business (whether or 
                                not incorporated), or
                                    ``(II) covered only one or more 
                                partners (and their spouses) in a 
                                business partnership (including partners 
                                in an S or C corporation (as defined in 
                                section 1361(a) of the Internal Revenue 
                                Code of 1986)),
                          ``(ii) meets the minimum coverage requirements 
                      of section 410(b) of the Internal Revenue Code of 
                      1986 (as in effect on the date of the enactment of 
                      this paragraph) without being combined with any 
                      other plan of the business that covers the 
                      employees of the business,
                          ``(iii) does not provide benefits to anyone 
                      except the employer (and the employer's spouse) or 
                      the partners (and their spouses),
                          ``(iv) does not cover a business that is a 
                      member of an affiliated service group, a 
                      controlled group of corporations, or a group of 
                      businesses under common control, and
                          ``(v) does not cover a business that leases 
                      employees.''.
            (2) Issuance <<NOTE: Deadlines.>>  of initial guidance and 
        model notice.--The Secretary of Labor shall issue initial 
        guidance and a model notice pursuant to section 101(i)(6) of the 
        Employee Retirement Income Security Act of 1974 (as added by 
        this subsection) not later than January 1, 
        2003. <<NOTE: Regulations.>>  Not later than 75 days after the 
        date of the enactment of this Act, the Secretary shall 
        promulgate interim final rules necessary to carry out the 
        amendments made by this subsection.
            (3) Civil penalties for failure to provide notice.--Section 
        502 of such Act (29 U.S.C. 1132) is amended--
                    (A) in subsection (a)(6), by striking ``(5), or 
                (6)'' and inserting ``(5), (6), or (7)'';
                    (B) by redesignating paragraph (7) of subsection (c) 
                as paragraph (8); and
                    (C) by inserting after paragraph (6) of subsection 
                (c) the following new paragraph:

    ``(7) The Secretary may assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan 
administrator's failure or refusal to provide notice to participants and 
beneficiaries in accordance with section 101(i). For purposes of this 
paragraph, each violation with respect to any single participant or 
beneficiary shall be treated as a separate violation.''.

[[Page 116 STAT. 784]]

            (3) Plan amendments.--If any amendment made by this 
        subsection requires an amendment to any plan, such plan 
        amendment shall not be required to be made before the first plan 
        year beginning on or after the effective date of this section, 
        if--
                    (A) during the period after such amendment made by 
                this subsection takes effect and before such first plan 
                year, the plan is operated in good faith compliance with 
                the requirements of such amendment made by this 
                subsection, and
                    (B) such plan amendment applies retroactively to the 
                period after such amendment made by this subsection 
                takes effect and before such first plan year.

    (c) Effective Date.--The provisions of this section (including the 
amendments made thereby) shall take effect 180 days after the date of 
the enactment of this Act. Good faith compliance with the requirements 
of such provisions in advance of the issuance of applicable regulations 
thereunder shall be treated as compliance with such provisions.

SEC. 307. <<NOTE: 15 USC 7245.>> RULES OF PROFESSIONAL RESPONSIBILITY 
            FOR ATTORNEYS.

    Not <<NOTE: Deadline.>> later than 180 days after the date of 
enactment of this Act, the Commission shall issue rules, in the public 
interest and for the protection of investors, setting forth minimum 
standards of professional conduct for attorneys appearing and practicing 
before the Commission in any way in the representation of issuers, 
including a rule--
            (1) requiring an attorney to report evidence of a material 
        violation of securities law or breach of fiduciary duty or 
        similar violation by the company or any agent thereof, to the 
        chief legal counsel or the chief executive officer of the 
        company (or the equivalent thereof); and
            (2) if the counsel or officer does not appropriately respond 
        to the evidence (adopting, as necessary, appropriate remedial 
        measures or sanctions with respect to the violation), requiring 
        the attorney to report the evidence to the audit committee of 
        the board of directors of the issuer or to another committee of 
        the board of directors comprised solely of directors not 
        employed directly or indirectly by the issuer, or to the board 
        of directors.

SEC. 308. <<NOTE: 15 USC 7246.>> FAIR FUNDS FOR INVESTORS.

    (a) Civil Penalties Added to Disgorgement Funds for the Relief of 
Victims.--If in any judicial or administrative action brought by the 
Commission under the securities laws (as such term is defined in section 
3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) 
the Commission obtains an order requiring disgorgement against any 
person for a violation of such laws or the rules or regulations 
thereunder, or such person agrees in settlement of any such action to 
such disgorgement, and the Commission also obtains pursuant to such laws 
a civil penalty against such person, the amount of such civil penalty 
shall, on the motion or at the direction of the Commission, be added to 
and become part of the disgorgement fund for the benefit of the victims 
of such violation.
    (b) Acceptance of Additional Donations.--The Commission is 
authorized to accept, hold, administer, and utilize gifts, bequests and 
devises of property, both real and personal, to the United

[[Page 116 STAT. 785]]

States for a disgorgement fund described in subsection (a). Such gifts, 
bequests, and devises of money and proceeds from sales of other property 
received as gifts, bequests, or devises shall be deposited in the 
disgorgement fund and shall be available for allocation in accordance 
with subsection (a).
    (c) Study Required.--
            (1) Subject of study.--The Commission shall review and 
        analyze--
                    (A) enforcement actions by the Commission over the 
                five years preceding the date of the enactment of this 
                Act that have included proceedings to obtain civil 
                penalties or disgorgements to identify areas where such 
                proceedings may be utilized to efficiently, effectively, 
                and fairly provide restitution for injured investors; 
                and
                    (B) other methods to more efficiently, effectively, 
                and fairly provide restitution to injured investors, 
                including methods to improve the collection rates for 
                civil penalties and disgorgements.
            (2) Report Required.--The <<NOTE: Deadline.>> Commission 
        shall report its findings to the Committee on Financial Services 
        of the House of Representatives and the Committee on Banking, 
        Housing, and Urban Affairs of the Senate within 180 days after 
        of the date of the enactment of this Act, and shall use such 
        findings to revise its rules and regulations as necessary. The 
        report shall include a discussion of regulatory or legislative 
        actions that are recommended or that may be necessary to address 
        concerns identified in the study.

    (d) Conforming Amendments.--Each of the following provisions is 
amended by inserting ``, except as otherwise provided in section 308 of 
the Sarbanes-Oxley Act of 2002'' after ``Treasury of the United 
States'':
            (1) Section 21(d)(3)(C)(i) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78u(d)(3)(C)(i)).
            (2) Section 21A(d)(1) of such Act (15 U.S.C. 78u-1(d)(1)).
            (3) Section 20(d)(3)(A) of the Securities Act of 1933 (15 
        U.S.C. 77t(d)(3)(A)).
            (4) Section 42(e)(3)(A) of the Investment Company Act of 
        1940 (15 U.S.C. 80a-41(e)(3)(A)).
            (5) Section 209(e)(3)(A) of the Investment Advisers Act of 
        1940 (15 U.S.C. 80b-9(e)(3)(A)).

    (e) Definition.--As used in this section, the term ``disgorgement 
fund'' means a fund established in any administrative or judicial 
proceeding described in subsection (a).

                TITLE IV--ENHANCED FINANCIAL DISCLOSURES

SEC. 401. DISCLOSURES <<NOTE: 15 USC 7261.>> IN PERIODIC REPORTS.

    (a) Disclosures Required.--Section 13 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78m) is amended by adding at the end the following:
    ``(i) Accuracy of Financial Reports.--Each financial report that 
contains financial statements, and that is required to be prepared in 
accordance with (or reconciled to) generally accepted accounting 
principles under this title and filed with the Commission shall reflect 
all material correcting adjustments that have been

[[Page 116 STAT. 786]]

identified by a registered public accounting firm in accordance with 
generally accepted accounting principles and the rules and regulations 
of the Commission.
    ``(j) Off-Balance Sheet Transactions.--
Not <<NOTE: Deadline. Regulations.>> later than 180 days after the date 
of enactment of the Sarbanes-Oxley Act of 2002, the Commission shall 
issue final rules providing that each annual and quarterly financial 
report required to be filed with the Commission shall disclose all 
material off-balance sheet transactions, arrangements, obligations 
(including contingent obligations), and other relationships of the 
issuer with unconsolidated entities or other persons, that may have a 
material current or future effect on financial condition, changes in 
financial condition, results of operations, liquidity, capital 
expenditures, capital resources, or significant components of revenues 
or expenses.''.

    (b) Commission Rules on Pro Forma Figures.--
Not <<NOTE: Deadline.>> later than 180 days after the date of enactment 
of the Sarbanes-Oxley Act fo 2002, the Commission shall issue final 
rules providing that pro forma financial information included in any 
periodic or other report filed with the Commission pursuant to the 
securities laws, or in any public disclosure or press or other release, 
shall be presented in a manner that--
            (1) does not contain an untrue statement of a material fact 
        or omit to state a material fact necessary in order to make the 
        pro forma financial information, in light of the circumstances 
        under which it is presented, not misleading; and
            (2) reconciles it with the financial condition and results 
        of operations of the issuer under generally accepted accounting 
        principles.

    (c) Study and Report on Special Purpose Entities.--
            (1) Study required.--The <<NOTE: Deadline.>> Commission 
        shall, not later than 1 year after the effective date of 
        adoption of off-balance sheet disclosure rules required by 
        section 13(j) of the Securities Exchange Act of 1934, as added 
        by this section, complete a study of filings by issuers and 
        their disclosures to determine--
                    (A) the extent of off-balance sheet transactions, 
                including assets, liabilities, leases, losses, and the 
                use of special purpose entities; and
                    (B) whether generally accepted accounting rules 
                result in financial statements of issuers reflecting the 
                economics of such off-balance sheet transactions to 
                investors in a transparent fashion.
            (2) Report and recommendations.--
        Not <<NOTE: Deadline.>> later than 6 months after the date of 
        completion of the study required by paragraph (1), the 
        Commission shall submit a report to the President, the Committee 
        on Banking, Housing, and Urban Affairs of the Senate, and the 
        Committee on Financial Services of the House of Representatives, 
        setting forth--
                    (A) the amount or an estimate of the amount of off-
                balance sheet transactions, including assets, 
                liabilities, leases, and losses of, and the use of 
                special purpose entities by, issuers filing periodic 
                reports pursuant to section 13 or 15 of the Securities 
                Exchange Act of 1934;
                    (B) the extent to which special purpose entities are 
                used to facilitate off-balance sheet transactions;

[[Page 116 STAT. 787]]

                    (C) whether generally accepted accounting principles 
                or the rules of the Commission result in financial 
                statements of issuers reflecting the economics of such 
                transactions to investors in a transparent fashion;
                    (D) whether generally accepted accounting principles 
                specifically result in the consolidation of special 
                purpose entities sponsored by an issuer in cases in 
                which the issuer has the majority of the risks and 
                rewards of the special purpose entity; and
                    (E) any recommendations of the Commission for 
                improving the transparency and quality of reporting off-
                balance sheet transactions in the financial statements 
                and disclosures required to be filed by an issuer with 
                the Commission.

SEC. 402. ENHANCED CONFLICT OF INTEREST PROVISIONS.

    (a) Prohibition on Personal Loans to Executives.--Section 13 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m), as amended by this Act, 
is amended by adding at the end the following:
    ``(k) Prohibition on Personal Loans to Executives.--
            ``(1) In general.--It shall be unlawful for any issuer (as 
        defined in section 2 of the Sarbanes-Oxley Act of 2002), 
        directly or indirectly, including through any subsidiary, to 
        extend or maintain credit, to arrange for the extension of 
        credit, or to renew an extension of credit, in the form of a 
        personal loan to or for any director or executive officer (or 
        equivalent thereof) of that issuer. An extension of credit 
        maintained by the issuer on the date of enactment of this 
        subsection shall not be subject to the provisions of this 
        subsection, provided that there is no material modification to 
        any term of any such extension of credit or any renewal of any 
        such extension of credit on or after that date of enactment.
            ``(2) Limitation.--Paragraph (1) does not preclude any home 
        improvement and manufactured home loans (as that term is defined 
        in section 5 of the Home Owners' Loan Act (12 U.S.C. 1464)), 
        consumer credit (as defined in section 103 of the Truth in 
        Lending Act (15 U.S.C. 1602)), or any extension of credit under 
        an open end credit plan (as defined in section 103 of the Truth 
        in Lending Act (15 U.S.C. 1602)), or a charge card (as defined 
        in section 127(c)(4)(e) of the Truth in Lending Act (15 U.S.C. 
        1637(c)(4)(e)), or any extension of credit by a broker or dealer 
        registered under section 15 of this title to an employee of that 
        broker or dealer to buy, trade, or carry securities, that is 
        permitted under rules or regulations of the Board of Governors 
        of the Federal Reserve System pursuant to section 7 of this 
        title (other than an extension of credit that would be used to 
        purchase the stock of that issuer), that is--
                    ``(A) made or provided in the ordinary course of the 
                consumer credit business of such issuer;
                    ``(B) of a type that is generally made available by 
                such issuer to the public; and
                    ``(C) made by such issuer on market terms, or terms 
                that are no more favorable than those offered by the 
                issuer to the general public for such extensions of 
                credit.
            ``(3) Rule of construction for certain loans.--Paragraph (1) 
        does not apply to any loan made or maintained

[[Page 116 STAT. 788]]

        by an insured depository institution (as defined in section 3 of 
        the Federal Deposit Insurance Act (12 U.S.C. 1813)), if the loan 
        is subject to the insider lending restrictions of section 22(h) 
        of the Federal Reserve Act (12 U.S.C. 375b).''.

SEC. 403. DISCLOSURES OF TRANSACTIONS INVOLVING MANAGEMENT AND PRINCIPAL 
            STOCKHOLDERS.

    (a) Amendment.--Section 16 of the Securities Exchange Act of 1934 
(15 U.S.C. 78p) is amended by striking the heading of such section and 
subsection (a) and inserting the following:

``SEC. 16. DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS.

    ``(a) Disclosures Required.--
            ``(1) Directors, officers, and principal stockholders 
        required to file.--Every person who is directly or indirectly 
        the beneficial owner of more than 10 percent of any class of any 
        equity security (other than an exempted security) which is 
        registered pursuant to section 12, or who is a director or an 
        officer of the issuer of such security, shall file the 
        statements required by this subsection with the Commission (and, 
        if such security is registered on a national securities 
        exchange, also with the exchange).
            ``(2) Time of filing.--The statements required by this 
        subsection shall be filed--
                    ``(A) at the time of the registration of such 
                security on a national securities exchange or by the 
                effective date of a registration statement filed 
                pursuant to section 12(g);
                    ``(B) within 10 days after he or she becomes such 
                beneficial owner, director, or officer;
                    ``(C) if there has been a change in such ownership, 
                or if such person shall have purchased or sold a 
                security-based swap agreement (as defined in section 
                206(b) of the Gramm-Leach-Bliley Act (15 U.S.C. 78c 
                note)) involving such equity security, before the end of 
                the second business day following the day on which the 
                subject transaction has been executed, or at such other 
                time as the Commission shall establish, by rule, in any 
                case in which the Commission determines that such 2-day 
                period is not feasible.
            ``(3) Contents of statements.--A statement filed--
                    ``(A) under subparagraph (A) or (B) of paragraph (2) 
                shall contain a statement of the amount of all equity 
                securities of such issuer of which the filing person is 
                the beneficial owner; and
                    ``(B) under subparagraph (C) of such paragraph shall 
                indicate ownership by the filing person at the date of 
                filing, any such changes in such ownership, and such 
                purchases and sales of the security-based swap 
                agreements as have occurred since the most recent such 
                filing under such subparagraph.
            ``(4) Electronic filing and availability.--
        Beginning <<NOTE: Deadline.>> not later than 1 year after the 
        date of enactment of the Sarbanes-Oxley Act of 2002--
                    ``(A) a statement filed under subparagraph (C) of 
                paragraph (2) shall be filed electronically;
                    ``(B) <<NOTE: Deadline.>> the Commission shall 
                provide each such statement on a publicly accessible 
                Internet site not later than the end of the business day 
                following that filing; and

[[Page 116 STAT. 789]]

                    ``(C) <<NOTE: Deadline.>> the issuer (if the issuer 
                maintains a corporate website) shall provide that 
                statement on that corporate website, not later than the 
                end of the business day following that filing.''.

    (b) Effective Date.--The <<NOTE: 15 USC 78p note.>> amendment made 
by this section shall be effective 30 days after the date of the 
enactment of this Act.

SEC. 404. MANAGEMENT <<NOTE: 15 USC 7262.>> ASSESSMENT OF INTERNAL 
            CONTROLS.

    (a) Rules Required.--The Commission shall prescribe rules requiring 
each annual report required by section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) to contain an internal 
control report, which shall--
            (1) state the responsibility of management for establishing 
        and maintaining an adequate internal control structure and 
        procedures for financial reporting; and
            (2) contain an assessment, as of the end of the most recent 
        fiscal year of the issuer, of the effectiveness of the internal 
        control structure and procedures of the issuer for financial 
        reporting.

    (b) Internal Control Evaluation and Reporting.--With respect to the 
internal control assessment required by subsection (a), each registered 
public accounting firm that prepares or issues the audit report for the 
issuer shall attest to, and report on, the assessment made by the 
management of the issuer. An attestation made under this subsection 
shall be made in accordance with standards for attestation engagements 
issued or adopted by the Board. Any such attestation shall not be the 
subject of a separate engagement.

SEC. 405. <<NOTE: 15 USC 7263.>> EXEMPTION.

    Nothing in section 401, 402, or 404, the amendments made by those 
sections, or the rules of the Commission under those sections shall 
apply to any investment company registered under section 8 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-8).

SEC. 406. CODE OF <<NOTE: 15 USC 7264.>> ETHICS FOR SENIOR FINANCIAL 
            OFFICERS.

    (a) Code of Ethics Disclosure.--
The <<NOTE: Regulations.>> Commission shall issue rules to require each 
issuer, together with periodic reports required pursuant to section 
13(a) or 15(d) of the Securities Exchange Act of 1934, to disclose 
whether or not, and if not, the reason therefor, such issuer has adopted 
a code of ethics for senior financial officers, applicable to its 
principal financial officer and comptroller or principal accounting 
officer, or persons performing similar functions.

    (b) Changes in Codes of Ethics.--
The <<NOTE: Regulations.>> Commission shall revise its regulations 
concerning matters requiring prompt disclosure on Form 8-K (or any 
successor thereto) to require the immediate disclosure, by means of the 
filing of such form, dissemination by the Internet or by other 
electronic means, by any issuer of any change in or waiver of the code 
of ethics for senior financial officers.

    (c) Definition.--In this section, the term ``code of ethics'' means 
such standards as are reasonably necessary to promote--
            (1) honest and ethical conduct, including the ethical 
        handling of actual or apparent conflicts of interest between 
        personal and professional relationships;

[[Page 116 STAT. 790]]

            (2) full, fair, accurate, timely, and understandable 
        disclosure in the periodic reports required to be filed by the 
        issuer; and
            (3) compliance with applicable governmental rules and 
        regulations.

    (d) Deadline for Rulemaking.--The Commission shall--
            (1) propose rules to implement this section, not later than 
        90 days after the date of enactment of this Act; and
            (2) issue final rules to implement this section, not later 
        than 180 days after that date of enactment.

SEC. 407. DISCLOSURE <<NOTE: 15 USC 7265.>> OF AUDIT COMMITTEE FINANCIAL 
            EXPERT.

    (a) Rules Defining ``Financial Expert''.--The Commission shall issue 
rules, as necessary or appropriate in the public interest and consistent 
with the protection of investors, to require each issuer, together with 
periodic reports required pursuant to sections 13(a) and 15(d) of the 
Securities Exchange Act of 1934, to disclose whether or not, and if not, 
the reasons therefor, the audit committee of that issuer is comprised of 
at least 1 member who is a financial expert, as such term is defined by 
the Commission.
    (b) Considerations.--In defining the term ``financial expert'' for 
purposes of subsection (a), the Commission shall consider whether a 
person has, through education and experience as a public accountant or 
auditor or a principal financial officer, comptroller, or principal 
accounting officer of an issuer, or from a position involving the 
performance of similar functions--
            (1) an understanding of generally accepted accounting 
        principles and financial statements;
            (2) experience in--
                    (A) the preparation or auditing of financial 
                statements of generally comparable issuers; and
                    (B) the application of such principles in connection 
                with the accounting for estimates, accruals, and 
                reserves;
            (3) experience with internal accounting controls; and
            (4) an understanding of audit committee functions.

    (c) Deadline for Rulemaking.--The Commission shall--
            (1) propose rules to implement this section, not later than 
        90 days after the date of enactment of this Act; and
            (2) issue final rules to implement this section, not later 
        than 180 days after that date of enactment.

SEC. 408. <<NOTE: 15 USC 7266.>> ENHANCED REVIEW OF PERIODIC DISCLOSURES 
            BY ISSUERS.

    (a) Regular and Systematic Review.--The Commission shall review 
disclosures made by issuers reporting under section 13(a) of the 
Securities Exchange Act of 1934 (including reports filed on Form 10-K), 
and which have a class of securities listed on a national securities 
exchange or traded on an automated quotation facility of a national 
securities association, on a regular and systematic basis for the 
protection of investors. Such review shall include a review of an 
issuer's financial statement.
    (b) Review Criteria.--For purposes of scheduling the reviews 
required by subsection (a), the Commission shall consider, among other 
factors--
            (1) issuers that have issued material restatements of 
        financial results;
            (2) issuers that experience significant volatility in their 
        stock price as compared to other issuers;
            (3) issuers with the largest market capitalization;

[[Page 116 STAT. 791]]

            (4) emerging companies with disparities in price to earning 
        ratios;
            (5) issuers whose operations significantly affect any 
        material sector of the economy; and
            (6) any other factors that the Commission may consider 
        relevant.

    (c) Minimum Review Period.--In no event shall an issuer required to 
file reports under section 13(a) or 15(d) of the Securities Exchange Act 
of 1934 be reviewed under this section less frequently than once every 3 
years.

SEC. 409. REAL TIME ISSUER DISCLOSURES.

    Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m), 
as amended by this Act, is amended by adding at the end the following:
    ``(l) Real Time Issuer Disclosures.--Each issuer reporting under 
section 13(a) or 15(d) shall disclose to the public on a rapid and 
current basis such additional information concerning material changes in 
the financial condition or operations of the issuer, in plain English, 
which may include trend and qualitative information and graphic 
presentations, as the Commission determines, by rule, is necessary or 
useful for the protection of investors and in the public interest.''.

                 TITLE V--ANALYST CONFLICTS OF INTEREST

SEC. 501. TREATMENT OF SECURITIES ANALYSTS BY REGISTERED SECURITIES 
            ASSOCIATIONS AND NATIONAL SECURITIES EXCHANGES.

    (a) Rules Regarding Securities Analysts.--The Securities Exchange 
Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after 
section 15C the following new section:

``SEC. 15D. <<NOTE: 15 USC 78o-6.>> SECURITIES ANALYSTS AND RESEARCH 
            REPORTS.

    ``(a) Analyst Protections.--The <<NOTE: Deadline.>> Commission, or 
upon the authorization and direction of the Commission, a registered 
securities association or national securities exchange, shall have 
adopted, not later than 1 year after the date of enactment of this 
section, rules reasonably designed to address conflicts of interest that 
can arise when securities analysts recommend equity securities in 
research reports and public appearances, in order to improve the 
objectivity of research and provide investors with more useful and 
reliable information, including rules designed--
            ``(1) to foster greater public confidence in securities 
        research, and to protect the objectivity and independence of 
        securities analysts, by--
                    ``(A) restricting the prepublication clearance or 
                approval of research reports by persons employed by the 
                broker or dealer who are engaged in investment banking 
                activities, or persons not directly responsible for 
                investment research, other than legal or compliance 
                staff;
                    ``(B) limiting the supervision and compensatory 
                evaluation of securities analysts to officials employed 
                by the broker or dealer who are not engaged in 
                investment banking activities; and

[[Page 116 STAT. 792]]

                    ``(C) requiring that a broker or dealer and persons 
                employed by a broker or dealer who are involved with 
                investment banking activities may not, directly or 
                indirectly, retaliate against or threaten to retaliate 
                against any securities analyst employed by that broker 
                or dealer or its affiliates as a result of an adverse, 
                negative, or otherwise unfavorable research report that 
                may adversely affect the present or prospective 
                investment banking relationship of the broker or dealer 
                with the issuer that is the subject of the research 
                report, except that such rules may not limit the 
                authority of a broker or dealer to discipline a 
                securities analyst for causes other than such research 
                report in accordance with the policies and procedures of 
                the firm;
            ``(2) to define periods during which brokers or dealers who 
        have participated, or are to participate, in a public offering 
        of securities as underwriters or dealers should not publish or 
        otherwise distribute research reports relating to such 
        securities or to the issuer of such securities;
            ``(3) to establish structural and institutional safeguards 
        within registered brokers or dealers to assure that securities 
        analysts are separated by appropriate informational partitions 
        within the firm from the review, pressure, or oversight of those 
        whose involvement in investment banking activities might 
        potentially bias their judgment or supervision; and
            ``(4) to address such other issues as the Commission, or 
        such association or exchange, determines appropriate.

    ``(b) Disclosure.--The Commission, or upon the authorization and 
direction of the Commission, a registered securities association or 
national securities exchange, shall have adopted, not later than 1 year 
after the date of enactment of this section, rules reasonably designed 
to require each securities analyst to disclose in public appearances, 
and each registered broker or dealer to disclose in each research 
report, as applicable, conflicts of interest that are known or should 
have been known by the securities analyst or the broker or dealer, to 
exist at the time of the appearance or the date of distribution of the 
report, including--
            ``(1) the extent to which the securities analyst has debt or 
        equity investments in the issuer that is the subject of the 
        appearance or research report;
            ``(2) whether any compensation has been received by the 
        registered broker or dealer, or any affiliate thereof, including 
        the securities analyst, from the issuer that is the subject of 
        the appearance or research report, subject to such exemptions as 
        the Commission may determine appropriate and necessary to 
        prevent disclosure by virtue of this paragraph of material non-
        public information regarding specific potential future 
        investment banking transactions of such issuer, as is 
        appropriate in the public interest and consistent with the 
        protection of investors;
            ``(3) whether an issuer, the securities of which are 
        recommended in the appearance or research report, currently is, 
        or during the 1-year period preceding the date of the appearance 
        or date of distribution of the report has been, a client of the 
        registered broker or dealer, and if so, stating the types of 
        services provided to the issuer;

[[Page 116 STAT. 793]]

            ``(4) whether the securities analyst received compensation 
        with respect to a research report, based upon (among any other 
        factors) the investment banking revenues (either generally or 
        specifically earned from the issuer being analyzed) of the 
        registered broker or dealer; and
            ``(5) such other disclosures of conflicts of interest that 
        are material to investors, research analysts, or the broker or 
        dealer as the Commission, or such association or exchange, 
        determines appropriate.

    ``(c) Definitions.--In this section--
            ``(1) the term `securities analyst' means any associated 
        person of a registered broker or dealer that is principally 
        responsible for, and any associated person who reports directly 
        or indirectly to a securities analyst in connection with, the 
        preparation of the substance of a research report, whether or 
        not any such person has the job title of `securities analyst'; 
        and
            ``(2) the term `research report' means a written or 
        electronic communication that includes an analysis of equity 
        securities of individual companies or industries, and that 
        provides information reasonably sufficient upon which to base an 
        investment decision.''.

    (b) Enforcement.--Section 21B(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78u-2(a)) is amended by inserting ``15D,'' before 
``15B''.
    (c) Commission Authority.--The <<NOTE: 15 USC 78o-6 
note.>> Commission may promulgate and amend its regulations, or direct a 
registered securities association or national securities exchange to 
promulgate and amend its rules, to carry out section 15D of the 
Securities Exchange Act of 1934, as added by this section, as is 
necessary for the protection of investors and in the public interest.

              TITLE VI--COMMISSION RESOURCES AND AUTHORITY

SEC. 601. AUTHORIZATION OF APPROPRIATIONS.

    Section 35 of the Securities Exchange Act of 1934 (15 U.S.C. 78kk) 
is amended to read as follows:

``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

    ``In addition to any other funds authorized to be appropriated to 
the Commission, there are authorized to be appropriated to carry out the 
functions, powers, and duties of the Commission, $776,000,000 for fiscal 
year 2003, of which--
            ``(1) $102,700,000 shall be available to fund additional 
        compensation, including salaries and benefits, as authorized in 
        the Investor and Capital Markets Fee Relief Act (Public Law 107-
        123; 115 Stat. 2390 et seq.);
            ``(2) $108,400,000 shall be available for information 
        technology, security enhancements, and recovery and mitigation 
        activities in light of the terrorist attacks of September 11, 
        2001; and
            ``(3) $98,000,000 shall be available to add not fewer than 
        an additional 200 qualified professionals to provide enhanced 
        oversight of auditors and audit services required by the Federal 
        securities laws, and to improve Commission investigative and

[[Page 116 STAT. 794]]

        disciplinary efforts with respect to such auditors and services, 
        as well as for additional professional support staff necessary 
        to strengthen the programs of the Commission involving Full 
        Disclosure and Prevention and Suppression of Fraud, risk 
        management, industry technology review, compliance, inspections, 
        examinations, market regulation, and investment management.''.

SEC. 602. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.

    The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 
amended by inserting after section 4B the following:

``SEC. 4C. <<NOTE: 15 USC 78d-3.>> APPEARANCE AND PRACTICE BEFORE THE 
            COMMISSION.

    ``(a) Authority To Censure.--The Commission may censure any person, 
or deny, temporarily or permanently, to any person the privilege of 
appearing or practicing before the Commission in any way, if that person 
is found by the Commission, after notice and opportunity for hearing in 
the matter--
            ``(1) not to possess the requisite qualifications to 
        represent others;
            ``(2) to be lacking in character or integrity, or to have 
        engaged in unethical or improper professional conduct; or
            ``(3) to have willfully violated, or willfully aided and 
        abetted the violation of, any provision of the securities laws 
        or the rules and regulations issued thereunder.

    ``(b) Definition.--With respect to any registered public accounting 
firm or associated person, for purposes of this section, the term 
`improper professional conduct' means--
            ``(1) intentional or knowing conduct, including reckless 
        conduct, that results in a violation of applicable professional 
        standards; and
            ``(2) negligent conduct in the form of--
                    ``(A) a single instance of highly unreasonable 
                conduct that results in a violation of applicable 
                professional standards in circumstances in which the 
                registered public accounting firm or associated person 
                knows, or should know, that heightened scrutiny is 
                warranted; or
                    ``(B) repeated instances of unreasonable conduct, 
                each resulting in a violation of applicable professional 
                standards, that indicate a lack of competence to 
                practice before the Commission.''.

SEC. 603. FEDERAL COURT AUTHORITY TO IMPOSE PENNY STOCK BARS.

    (a) Securities Exchange Act of 1934.--Section 21(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)), as amended by this 
Act, is amended by adding at the end the following:
    ``(6) Authority of a court to prohibit persons from participating in 
an offering of penny stock.--
            ``(A) In general.--In any proceeding under paragraph (1) 
        against any person participating in, or, at the time of the 
        alleged misconduct who was participating in, an offering of 
        penny stock, the court may prohibit that person from 
        participating in an offering of penny stock, conditionally or 
        unconditionally, and permanently or for such period of time as 
        the court shall determine.
            ``(B) Definition.--For purposes of this paragraph, the term 
        `person participating in an offering of penny stock' includes

[[Page 116 STAT. 795]]

        any person engaging in activities with a broker, dealer, or 
        issuer for purposes of issuing, trading, or inducing or 
        attempting to induce the purchase or sale of, any penny stock. 
        The Commission may, by rule or regulation, define such term to 
        include other activities, and may, by rule, regulation, or 
        order, exempt any person or class of persons, in whole or in 
        part, conditionally or unconditionally, from inclusion in such 
        term.''.

    (b) Securities Act of 1933.--Section 20 of the Securities Act of 
1933 (15 U.S.C. 77t) is amended by adding at the end the following:
    ``(g) Authority of a Court To Prohibit Persons From Participating in 
an Offering of Penny Stock.--
            ``(1) In general.--In any proceeding under subsection (a) 
        against any person participating in, or, at the time of the 
        alleged misconduct, who was participating in, an offering of 
        penny stock, the court may prohibit that person from 
        participating in an offering of penny stock, conditionally or 
        unconditionally, and permanently or for such period of time as 
        the court shall determine.
            ``(2) Definition.--For purposes of this subsection, the term 
        `person participating in an offering of penny stock' includes 
        any person engaging in activities with a broker, dealer, or 
        issuer for purposes of issuing, trading, or inducing or 
        attempting to induce the purchase or sale of, any penny stock. 
        The Commission may, by rule or regulation, define such term to 
        include other activities, and may, by rule, regulation, or 
        order, exempt any person or class of persons, in whole or in 
        part, conditionally or unconditionally, from inclusion in such 
        term.''.

SEC. 604. QUALIFICATIONS OF ASSOCIATED PERSONS OF BROKERS AND DEALERS.

    (a) Brokers and Dealers.--Section 15(b)(4) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o) is amended--
            (1) by striking subparagraph (F) and inserting the 
        following:
            ``(F) is subject to any order of the Commission barring or 
        suspending the right of the person to be associated with a 
        broker or dealer;''; and
            (2) in subparagraph (G), by striking the period at the end 
        and inserting the following: ``; or
            ``(H) is subject to any final order of a State securities 
        commission (or any agency or officer performing like functions), 
        State authority that supervises or examines banks, savings 
        associations, or credit unions, State insurance commission (or 
        any agency or office performing like functions), an appropriate 
        Federal banking agency (as defined in section 3 of the Federal 
        Deposit Insurance Act (12 U.S.C. 1813(q))), or the National 
        Credit Union Administration, that--
                    ``(i) bars such person from association with an 
                entity regulated by such commission, authority, agency, 
                or officer, or from engaging in the business of 
                securities, insurance, banking, savings association 
                activities, or credit union activities; or

[[Page 116 STAT. 796]]

                    ``(ii) constitutes a final order based on violations 
                of any laws or regulations that prohibit fraudulent, 
                manipulative, or deceptive conduct.''.

    (b) Investment Advisers.--Section 203(e) of the Investment Advisers 
Act of 1940 (15 U.S.C. 80b-3(e)) is amended--
            (1) by striking paragraph (7) and inserting the following:
            ``(7) is subject to any order of the Commission barring or 
        suspending the right of the person to be associated with an 
        investment adviser;'';
            (2) in paragraph (8), by striking the period at the end and 
        inserting ``; or''; and
            (3) by adding at the end the following:
            ``(9) is subject to any final order of a State securities 
        commission (or any agency or officer performing like functions), 
        State authority that supervises or examines banks, savings 
        associations, or credit unions, State insurance commission (or 
        any agency or office performing like functions), an appropriate 
        Federal banking agency (as defined in section 3 of the Federal 
        Deposit Insurance Act (12 U.S.C. 1813(q))), or the National 
        Credit Union Administration, that--
                    ``(A) bars such person from association with an 
                entity regulated by such commission, authority, agency, 
                or officer, or from engaging in the business of 
                securities, insurance, banking, savings association 
                activities, or credit union activities; or
                    ``(B) constitutes a final order based on violations 
                of any laws or regulations that prohibit fraudulent, 
                manipulative, or deceptive conduct.''.

    (c) Conforming Amendments.--
            (1) Securities exchange act of 1934.--The Securities 
        Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--
                    (A) in section 3(a)(39)(F) (15 U.S.C. 
                78c(a)(39)(F))--
                          (i) by striking ``or (G)'' and inserting 
                      ``(H), or (G)''; and
                          (ii) by inserting ``, or is subject to an 
                      order or finding,'' before ``enumerated'';
                    (B) in each of section 15(b)(6)(A)(i) (15 U.S.C. 
                78o(b)(6)(A)(i)), paragraphs (2) and (4) of section 
                15B(c) (15 U.S.C. 78o-4(c)), and subparagraphs (A) and 
                (C) of section 15C(c)(1) (15 U.S.C. 78o-5(c)(1))--
                          (i) by striking ``or (G)'' each place that 
                      term appears and inserting ``(H), or (G)''; and
                          (ii) by striking ``or omission'' each place 
                      that term appears, and inserting ``, or is subject 
                      to an order or finding,''; and
                    (C) in each of paragraphs (3)(A) and (4)(C) of 
                section 17A(c) (15 U.S.C. 78q-1(c))--
                          (i) by striking ``or (G)'' each place that 
                      term appears and inserting ``(H), or (G)''; and
                          (ii) by inserting ``, or is subject to an 
                      order or finding,'' before ``enumerated'' each 
                      place that term appears.
            (2) Investment advisers act of 1940.--Section 203(f) of the 
        Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is 
        amended--
                    (A) by striking ``or (8)'' and inserting ``(8), or 
                (9)''; and
                    (B) by inserting ``or (3)'' after ``paragraph (2)''.

[[Page 116 STAT. 797]]

                     TITLE VII--STUDIES AND REPORTS

SEC. 701. <<NOTE: 15 USC 7201 note.>> GAO STUDY AND REPORT REGARDING 
            CONSOLIDATION OF PUBLIC ACCOUNTING FIRMS.

    (a) Study Required.--The Comptroller General of the United States 
shall conduct a study--
            (1) to identify--
                    (A) the factors that have led to the consolidation 
                of public accounting firms since 1989 and the consequent 
                reduction in the number of firms capable of providing 
                audit services to large national and multi-national 
                business organizations that are subject to the 
                securities laws;
                    (B) the present and future impact of the condition 
                described in subparagraph (A) on capital formation and 
                securities markets, both domestic and international; and
                    (C) solutions to any problems identified under 
                subparagraph (B), including ways to increase competition 
                and the number of firms capable of providing audit 
                services to large national and multinational business 
                organizations that are subject to the securities laws;
            (2) of the problems, if any, faced by business organizations 
        that have resulted from limited competition among public 
        accounting firms, including--
                    (A) higher costs;
                    (B) lower quality of services;
                    (C) impairment of auditor independence; or
                    (D) lack of choice; and
            (3) whether and to what extent Federal or State regulations 
        impede competition among public accounting firms.

    (b) Consultation.--In planning and conducting the study under this 
section, the Comptroller General shall consult with--
            (1) the Commission;
            (2) the regulatory agencies that perform functions similar 
        to the Commission within the other member countries of the Group 
        of Seven Industrialized Nations;
            (3) the Department of Justice; and
            (4) any other public or private sector organization that the 
        Comptroller General considers appropriate.

    (c) Report Required.--Not <<NOTE: Deadline.>> later than 1 year 
after the date of enactment of this Act, the Comptroller General shall 
submit a report on the results of the study required by this section to 
the Committee on Banking, Housing, and Urban Affairs of the Senate and 
the Committee on Financial Services of the House of Representatives.

SEC. 702. COMMISSION STUDY AND REPORT REGARDING CREDIT RATING AGENCIES.

    (a) Study Required.--
            (1) In general.--The Commission shall conduct a study of the 
        role and function of credit rating agencies in the operation of 
        the securities market.
            (2) Areas of consideration.--The study required by this 
        subsection shall examine--
                    (A) the role of credit rating agencies in the 
                evaluation of issuers of securities;

[[Page 116 STAT. 798]]

                    (B) the importance of that role to investors and the 
                functioning of the securities markets;
                    (C) any impediments to the accurate appraisal by 
                credit rating agencies of the financial resources and 
                risks of issuers of securities;
                    (D) any barriers to entry into the business of 
                acting as a credit rating agency, and any measures 
                needed to remove such barriers;
                    (E) any measures which may be required to improve 
                the dissemination of information concerning such 
                resources and risks when credit rating agencies announce 
                credit ratings; and
                    (F) any conflicts of interest in the operation of 
                credit rating agencies and measures to prevent such 
                conflicts or ameliorate the consequences of such 
                conflicts.

    (b) Report Required.--The <<NOTE: Deadline.>> Commission shall 
submit a report on the study required by subsection (a) to the 
President, the Committee on Financial Services of the House of 
Representatives, and the Committee on Banking, Housing, and Urban 
Affairs of the Senate not later than 180 days after the date of 
enactment of this Act.

SEC. 703. STUDY AND REPORT ON VIOLATORS AND VIOLATIONS.

    (a) Study.--The Commission shall conduct a study to determine, based 
upon information for the period from January 1, 1998, to December 31, 
2001--
            (1) the number of securities professionals, defined as 
        public accountants, public accounting firms, investment bankers, 
        investment advisers, brokers, dealers, attorneys, and other 
        securities professionals practicing before the Commission--
                    (A) who have been found to have aided and abetted a 
                violation of the Federal securities laws, including 
                rules or regulations promulgated thereunder 
                (collectively referred to in this section as ``Federal 
                securities laws''), but who have not been sanctioned, 
                disciplined, or otherwise penalized as a primary 
                violator in any administrative action or civil 
                proceeding, including in any settlement of such an 
                action or proceeding (referred to in this section as 
                ``aiders and abettors''); and
                    (B) who have been found to have been primary 
                violators of the Federal securities laws;
            (2) a description of the Federal securities laws violations 
        committed by aiders and abettors and by primary violators, 
        including--
                    (A) the specific provision of the Federal securities 
                laws violated;
                    (B) the specific sanctions and penalties imposed 
                upon such aiders and abettors and primary violators, 
                including the amount of any monetary penalties assessed 
                upon and collected from such persons;
                    (C) the occurrence of multiple violations by the 
                same person or persons, either as an aider or abettor or 
                as a primary violator; and
                    (D) whether, as to each such violator, disciplinary 
                sanctions have been imposed, including any censure, 
                suspension, temporary bar, or permanent bar to practice 
                before the Commission; and

[[Page 116 STAT. 799]]

            (3) the amount of disgorgement, restitution, or any other 
        fines or payments that the Commission has assessed upon and 
        collected from, aiders and abettors and from primary violators.

    (b) Report.--A report based upon the study conducted pursuant to 
subsection (a) shall be submitted to the Committee on Banking, Housing, 
and Urban Affairs of the Senate, and the Committee on Financial Services 
of the House of Representatives not later than 6 months after the date 
of enactment of this Act.

SEC. 704. STUDY OF ENFORCEMENT ACTIONS.

    (a) Study Required.--The Commission shall review and analyze all 
enforcement actions by the Commission involving violations of reporting 
requirements imposed under the securities laws, and restatements of 
financial statements, over the 5-year period preceding the date of 
enactment of this Act, to identify areas of reporting that are most 
susceptible to fraud, inappropriate manipulation, or inappropriate 
earnings management, such as revenue recognition and the accounting 
treatment of off-balance sheet special purpose entities.
    (b) Report <<NOTE: Deadline.>> Required.--The Commission shall 
report its findings to the Committee on Financial Services of the House 
of Representatives and the Committee on Banking, Housing, and Urban 
Affairs of the Senate, not later than 180 days after the date of 
enactment of this Act, and shall use such findings to revise its rules 
and regulations, as necessary. The report shall include a discussion of 
regulatory or legislative steps that are recommended or that may be 
necessary to address concerns identified in the study.

SEC. 705. STUDY OF INVESTMENT BANKS.

    (a) GAO Study.--The Comptroller General of the United States shall 
conduct a study on whether investment banks and financial advisers 
assisted public companies in manipulating their earnings and obfuscating 
their true financial condition. The study should address the rule of 
investment banks and financial advisers--
            (1) in the collapse of the Enron Corporation, including with 
        respect to the design and implementation of derivatives 
        transactions, transactions involving special purpose vehicles, 
        and other financial arrangements that may have had the effect of 
        altering the company's reported financial statements in ways 
        that obscured the true financial picture of the company;
            (2) in the failure of Global Crossing, including with 
        respect to transactions involving swaps of fiberoptic cable 
        capacity, in the designing transactions that may have had the 
        effect of altering the company's reported financial statements 
        in ways that obscured the true financial picture of the company; 
        and
            (3) generally, in creating and marketing transactions which 
        may have been designed solely to enable companies to manipulate 
        revenue streams, obtain loans, or move liabilities off balance 
        sheets without altering the economic and business risks faced by 
        the companies or any other mechanism to obscure a company's 
        financial picture.

    (b) Report.--The <<NOTE: Deadline.>> Comptroller General shall 
report to Congress not later than 180 days after the date of enactment 
of this Act on the results of the study required by this section. The 
report shall include a discussion of regulatory or legislative steps 
that

[[Page 116 STAT. 800]]

are recommended or that may be necessary to address concerns identified 
in the study.

       TITLE VIII--CORPORATE <<NOTE: Corporate and Criminal Fraud 
Accountability Act of 2002.>> AND CRIMINAL FRAUD ACCOUNTABILITY

SEC. 801. <<NOTE: 18 USC 1501 note.>> SHORT TITLE.

    This title may be cited as the ``Corporate and Criminal Fraud 
Accountability Act of 2002''.

SEC. 802. CRIMINAL PENALTIES FOR ALTERING DOCUMENTS.

    (a) In General.--Chapter 73 of title 18, United States Code, is 
amended by adding at the end the following:

``Sec. 1519. Destruction, alteration, or falsification of records in 
                        Federal investigations and bankruptcy

    ``Whoever knowingly alters, destroys, mutilates, conceals, covers 
up, falsifies, or makes a false entry in any record, document, or 
tangible object with the intent to impede, obstruct, or influence the 
investigation or proper administration of any matter within the 
jurisdiction of any department or agency of the United States or any 
case filed under title 11, or in relation to or contemplation of any 
such matter or case, shall be fined under this title, imprisoned not 
more than 20 years, or both.

``Sec. 1520. Destruction of corporate audit records

    ``(a)(1) Any accountant who conducts an audit of an issuer of 
securities to which section 10A(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78j-1(a)) applies, shall maintain all audit or review 
workpapers for a period of 5 years from the end of the fiscal period in 
which the audit or review was concluded.
    ``(2) <<NOTE: Regulations.>> The Securities and Exchange Commission 
shall promulgate, within 180 days, after adequate notice and an 
opportunity for comment, such rules and regulations, as are reasonably 
necessary, relating to the retention of relevant records such as 
workpapers, documents that form the basis of an audit or review, 
memoranda, correspondence, communications, other documents, and records 
(including electronic records) which are created, sent, or received in 
connection with an audit or review and contain conclusions, opinions, 
analyses, or financial data relating to such an audit or review, which 
is conducted by any accountant who conducts an audit of an issuer of 
securities to which section 10A(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78j-1(a)) applies. The Commission may, from time to 
time, amend or supplement the rules and regulations that it is required 
to promulgate under this section, after adequate notice and an 
opportunity for comment, in order to ensure that such rules and 
regulations adequately comport with the purposes of this section.

    ``(b) Whoever knowingly and willfully violates subsection (a)(1), or 
any rule or regulation promulgated by the Securities and Exchange 
Commission under subsection (a)(2), shall be fined under this title, 
imprisoned not more than 10 years, or both.
    ``(c) Nothing in this section shall be deemed to diminish or relieve 
any person of any other duty or obligation imposed by Federal or State 
law or regulation to maintain, or refrain from destroying, any 
document.''.

[[Page 116 STAT. 801]]

    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by adding at the 
end the following new items:

``1519. Destruction, alteration, or falsification of records in Federal 
           investigations and bankruptcy.
``1520. Destruction of corporate audit records.''.

SEC. 803. DEBTS NONDISCHARGEABLE IF INCURRED IN VIOLATION OF SECURITIES 
            FRAUD LAWS.

    Section 523(a) of title 11, United States Code, is amended--
            (1) in paragraph (17), by striking ``or'' after the 
        semicolon;
            (2) in paragraph (18), by striking the period at the end and 
        inserting ``; or''; and
            (3) by adding at the end, the following:
            ``(19) that--
                    ``(A) is for--
                          ``(i) the violation of any of the Federal 
                      securities laws (as that term is defined in 
                      section 3(a)(47) of the Securities Exchange Act of 
                      1934), any of the State securities laws, or any 
                      regulation or order issued under such Federal or 
                      State securities laws; or
                          ``(ii) common law fraud, deceit, or 
                      manipulation in connection with the purchase or 
                      sale of any security; and
                    ``(B) results from--
                          ``(i) any judgment, order, consent order, or 
                      decree entered in any Federal or State judicial or 
                      administrative proceeding;
                          ``(ii) any settlement agreement entered into 
                      by the debtor; or
                          ``(iii) any court or administrative order for 
                      any damages, fine, penalty, citation, 
                      restitutionary payment, disgorgement payment, 
                      attorney fee, cost, or other payment owed by the 
                      debtor.''.

SEC. 804. STATUTE OF LIMITATIONS FOR SECURITIES FRAUD.

    (a) In General.--Section 1658 of title 28, United States Code, is 
amended--
            (1) by inserting ``(a)'' before ``Except''; and
            (2) by adding at the end the following:

    ``(b) Notwithstanding subsection (a), a private right of action that 
involves a claim of fraud, deceit, manipulation, or contrivance in 
contravention of a regulatory requirement concerning the securities 
laws, as defined in section 3(a)(47) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)(47)), may be brought not later than the earlier 
of--
            ``(1) 2 years after the discovery of the facts constituting 
        the violation; or
            ``(2) 5 years after such violation.''.

    (b) Effective <<NOTE: 28 USC 1658 note.>> Date.--The limitations 
period provided by section 1658(b) of title 28, United States Code, as 
added by this section, shall apply to all proceedings addressed by this 
section that are commenced on or after the date of enactment of this 
Act.

    (c) <<NOTE: 28 USC 1658 note.>> No Creation of Actions.--Nothing in 
this section shall create a new, private right of action.

[[Page 116 STAT. 802]]

SEC. 805. <<NOTE: 28 USC 994 note.>> REVIEW OF FEDERAL SENTENCING 
            GUIDELINES FOR OBSTRUCTION OF JUSTICE AND EXTENSIVE CRIMINAL 
            FRAUD.

    (a) Enhancement of Fraud and Obstruction of Justice Sentences.--
Pursuant to section 994 of title 28, United States Code, and in 
accordance with this section, the United States Sentencing Commission 
shall review and amend, as appropriate, the Federal Sentencing 
Guidelines and related policy statements to ensure that--
            (1) the base offense level and existing enhancements 
        contained in United States Sentencing Guideline 2J1.2 relating 
        to obstruction of justice are sufficient to deter and punish 
        that activity;
            (2) the enhancements and specific offense characteristics 
        relating to obstruction of justice are adequate in cases where--
                    (A) the destruction, alteration, or fabrication of 
                evidence involves--
                          (i) a large amount of evidence, a large number 
                      of participants, or is otherwise extensive;
                          (ii) the selection of evidence that is 
                      particularly probative or essential to the 
                      investigation; or
                          (iii) more than minimal planning; or
                    (B) the offense involved abuse of a special skill or 
                a position of trust;
            (3) the guideline offense levels and enhancements for 
        violations of section 1519 or 1520 of title 18, United States 
        Code, as added by this title, are sufficient to deter and punish 
        that activity;
            (4) a specific offense characteristic enhancing sentencing 
        is provided under United States Sentencing Guideline 2B1.1 (as 
        in effect on the date of enactment of this Act) for a fraud 
        offense that endangers the solvency or financial security of a 
        substantial number of victims; and
            (5) the guidelines that apply to organizations in United 
        States Sentencing Guidelines, chapter 8, are sufficient to deter 
        and punish organizational criminal misconduct.

    (b) Emergency Authority and Deadline for Commission Action.--The 
United <<NOTE: Deadline.>> States Sentencing Commission is requested to 
promulgate the guidelines or amendments provided for under this section 
as soon as practicable, and in any event not later than 180 days after 
the date of enactment of this Act, in accordance with the prcedures set 
forth in section 219(a) of the Sentencing Reform Act of 1987, as though 
the authority under that Act had not expired.

SEC. 806. PROTECTION FOR EMPLOYEES OF PUBLICLY TRADED COMPANIES WHO 
            PROVIDE EVIDENCE OF FRAUD.

    (a) In General.--Chapter 73 of title 18, United States Code, is 
amended by inserting after section 1514 the following:

``Sec. 1514A. Civil action to protect against retaliation in fraud cases

    ``(a) Whistleblower Protection for Employees of Publicly Traded 
Companies.--No company with a class of securities registered under 
section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or 
that is required to file reports under section 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o(d)),

[[Page 116 STAT. 803]]

or any officer, employee, contractor, subcontractor, or agent of such 
company, may discharge, demote, suspend, threaten, harass, or in any 
other manner discriminate against an employee in the terms and 
conditions of employment because of any lawful act done by the 
employee--
            ``(1) to provide information, cause information to be 
        provided, or otherwise assist in an investigation regarding any 
        conduct which the employee reasonably believes constitutes a 
        violation of section 1341, 1343, 1344, or 1348, any rule or 
        regulation of the Securities and Exchange Commission, or any 
        provision of Federal law relating to fraud against shareholders, 
        when the information or assistance is provided to or the 
        investigation is conducted by--
                    ``(A) a Federal regulatory or law enforcement 
                agency;
                    ``(B) any Member of Congress or any committee of 
                Congress; or
                    ``(C) a person with supervisory authority over the 
                employee (or such other person working for the employer 
                who has the authority to investigate, discover, or 
                terminate misconduct); or
            ``(2) to file, cause to be filed, testify, participate in, 
        or otherwise assist in a proceeding filed or about to be filed 
        (with any knowledge of the employer) relating to an alleged 
        violation of section 1341, 1343, 1344, or 1348, any rule or 
        regulation of the Securities and Exchange Commission, or any 
        provision of Federal law relating to fraud against shareholders.

    ``(b) Enforcement Action.--
            ``(1) In general.--A person who alleges discharge or other 
        discrimination by any person in violation of subsection (a) may 
        seek relief under subsection (c), by--
                    ``(A) filing a complaint with the Secretary of 
                Labor; or
                    ``(B) if the Secretary has not issued a final 
                decision within 180 days of the filing of the complaint 
                and there is no showing that such delay is due to the 
                bad faith of the claimant, bringing an action at law or 
                equity for de novo review in the appropriate district 
                court of the United States, which shall have 
                jurisdiction over such an action without regard to the 
                amount in controversy.
            ``(2) Procedure.--
                    ``(A) In general.--An action under paragraph (1)(A) 
                shall be governed under the rules and procedures set 
                forth in section 42121(b) of title 49, United States 
                Code.
                    ``(B) Exception.--Notification made under section 
                42121(b)(1) of title 49, United States Code, shall be 
                made to the person named in the complaint and to the 
                employer.
                    ``(C) Burdens of proof.--An action brought under 
                paragraph (1)(B) shall be governed by the legal burdens 
                of proof set forth in section 42121(b) of title 49, 
                United States Code.
                    ``(D) <<NOTE: Deadline.>> Statute of limitations.--
                An action under paragraph (1) shall be commenced not 
                later than 90 days after the date on which the violation 
                occurs.

    ``(c) Remedies.--
            ``(1) In general.--An employee prevailing in any action 
        under subsection (b)(1) shall be entitled to all relief 
        necessary to make the employee whole.

[[Page 116 STAT. 804]]

            ``(2) Compensatory damages.--Relief for any action under 
        paragraph (1) shall include--
                    ``(A) reinstatement with the same seniority status 
                that the employee would have had, but for the 
                discrimination;
                    ``(B) the amount of back pay, with interest; and
                    ``(C) compensation for any special damages sustained 
                as a result of the discrimination, including litigation 
                costs, expert witness fees, and reasonable attorney 
                fees.

    ``(d) Rights Retained by Employee.--Nothing in this section shall be 
deemed to diminish the rights, privileges, or remedies of any employee 
under any Federal or State law, or under any collective bargaining 
agreement.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by inserting 
after the item relating to section 1514 the following new item:

``1514A. Civil action to protect against retaliation in fraud cases.''.

SEC. 807. CRIMINAL PENALTIES FOR DEFRAUDING SHAREHOLDERS OF PUBLICLY 
            TRADED COMPANIES.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by adding at the end the following:

``Sec. 1348. Securities fraud

    ``Whoever knowingly executes, or attempts to execute, a scheme or 
artifice--
            ``(1) to defraud any person in connection with any security 
        of an issuer with a class of securities registered under section 
        12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or 
        that is required to file reports under section 15(d) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any money or property in 
        connection with the purchase or sale of any security of an 
        issuer with a class of securities registered under section 12 of 
        the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is 
        required to file reports under section 15(d) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78o(d));

shall be fined under this title, or imprisoned not more than 25 years, 
or both.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following new item:

``1348. Securities fraud.''.

 TITLE IX--WHITE-COLLAR <<NOTE: White-Collar Crime Penalty Enhancement 
Act of 2002.>> CRIME PENALTY ENHANCEMENTS

SEC. 901. <<NOTE: 18 USC 1341 note.>> SHORT TITLE.

    This title may be cited as the ``White-Collar Crime Penalty 
Enhancement Act of 2002''.

[[Page 116 STAT. 805]]

SEC. 902. ATTEMPTS AND CONSPIRACIES TO COMMIT CRIMINAL FRAUD OFFENSES.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by inserting after section 1348 as added by this Act the 
following:

``Sec. 1349. Attempt and conspiracy

    ``Any person who attempts or conspires to commit any offense under 
this chapter shall be subject to the same penalties as those prescribed 
for the offense, the commission of which was the object of the attempt 
or conspiracy.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following new item:

``1349. Attempt and conspiracy.''.

SEC. 903. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.

    (a) Mail Fraud.--Section 1341 of title 18, United States Code, is 
amended by striking ``five'' and inserting ``20''.
    (b) Wire Fraud.--Section 1343 of title 18, United States Code, is 
amended by striking ``five'' and inserting ``20''.

SEC. 904. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE RETIREMENT 
            INCOME SECURITY ACT OF 1974.

    Section 501 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1131) is amended--
            (1) by striking ``$5,000'' and inserting ``$100,000'';
            (2) by striking ``one year'' and inserting ``10 years''; and
            (3) by striking ``$100,000'' and inserting ``$500,000''.

SEC. 905. <<NOTE: 28 USC 994 note.>> AMENDMENT TO SENTENCING GUIDELINES 
            RELATING TO CERTAIN WHITE-COLLAR OFFENSES.

    (a) Directive to the United States Sentencing Commission.--Pursuant 
to its authority under section 994(p) of title 18, United States Code, 
and in accordance with this section, the United States Sentencing 
Commission shall review and, as appropriate, amend the Federal 
Sentencing Guidelines and related policy statements to implement the 
provisions of this Act.
    (b) Requirements.--In carrying out this section, the Sentencing 
Commission shall--
            (1) ensure that the sentencing guidelines and policy 
        statements reflect the serious nature of the offenses and the 
        penalties set forth in this Act, the growing incidence of 
        serious fraud offenses which are identified above, and the need 
        to modify the sentencing guidelines and policy statements to 
        deter, prevent, and punish such offenses;
            (2) consider the extent to which the guidelines and policy 
        statements adequately address whether the guideline offense 
        levels and enhancements for violations of the sections amended 
        by this Act are sufficient to deter and punish such offenses, 
        and specifically, are adequate in view of the statutory 
        increases in penalties contained in this Act;
            (3) assure reasonable consistency with other relevant 
        directives and sentencing guidelines;
            (4) account for any additional aggravating or mitigating 
        circumstances that might justify exceptions to the generally 
        applicable sentencing ranges;

[[Page 116 STAT. 806]]

            (5) make any necessary conforming changes to the sentencing 
        guidelines; and
            (6) assure that the guidelines adequately meet the purposes 
        of sentencing, as set forth in section 3553(a)(2) of title 18, 
        United States Code.

    (c) Emergency Authority and Deadline for Commission Action.--The 
United States Sentencing Commission is requested to promulgate the 
guidelines or amendments provided for under this section as soon as 
practicable, and in any event not later than 180 days after the date of 
enactment of this Act, in accordance with the procedures set forth in 
section 219(a) of the Sentencing Reform Act of 1987, as though the 
authority under that Act had not expired.

SEC. 906. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by inserting after section 1349, as created by this Act, the 
following:

``Sec. 1350. Failure of corporate officers to certify financial reports

    (a) Certification of Periodic Financial Reports.--Each periodic 
report containing financial statements filed by an issuer with the 
Securities Exchange Commission pursuant to section 13(a) or 15(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) shall be 
accompanied by a written statement by the chief executive officer and 
chief financial officer (or equivalent thereof) of the issuer.
    ``(b) Content.--The statement required under subsection (a) shall 
certify that the periodic report containing the financial statements 
fully complies with the requirements of section 13(a) or 15(d) of the 
Securities Exchange Act pf 1934 (15 U.S.C. 78m or 78o(d)) and that 
information contained in the periodic report fairly presents, in all 
material respects, the financial condition and results of operations of 
the issuer.
    ``(c) Criminal Penalties.--Whoever--
            ``(1) certifies any statement as set forth in subsections 
        (a) and (b) of this section knowing that the periodic report 
        accompanying the statement does not comport with all the 
        requirements set forth in this section shall be fined not more 
        than $1,000,000 or imprisoned not more than 10 years, or both; 
        or
            ``(2) willfully certifies any statement as set forth in 
        subsections (a) and (b) of this section knowing that the 
        periodic report accompanying the statement does not comport with 
        all the requirements set forth in this section shall be fined 
        not more than $5,000,000, or imprisoned not more than 20 years, 
        or both.''.

    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following:

``1350. Failure of corporate officers to certify financial reports.''.

[[Page 116 STAT. 807]]

                     TITLE X--CORPORATE TAX RETURNS

SEC. 1001. SENSE OF THE SENATE REGARDING THE SIGNING OF CORPORATE TAX 
            RETURNS BY CHIEF EXECUTIVE OFFICERS.

    It is the sense of the Senate that the Federal income tax return of 
a corporation should be signed by the chief executive officer of such 
corporation.

   TITLE XI--CORPORATE <<NOTE: Corporate Fraud Accountability Act of 
2002.>> FRAUD ACCOUNTABILITY

SEC. 1101. <<NOTE: 15 USC 78a note.>> SHORT TITLE.

    This title may be cited as the ``Corporate Fraud Accountability Act 
of 2002''.

SEC. 1102. TAMPERING WITH A RECORD OR OTHERWISE IMPEDING AN OFFICIAL 
            PROCEEDING.

    Section 1512 of title 18, United States Code, is amended--
            (1) by redesignating subsections (c) through (i) as 
        subsections (d) through (j), respectively; and
            (2) by inserting after subsection (b) the following new 
        subsection:

    ``(c) Whoever corruptly--
            ``(1) alters, destroys, mutilates, or conceals a record, 
        document, or other object, or attempts to do so, with the intent 
        to impair the object's integrity or availability for use in an 
        official proceeding; or
            ``(2) otherwise obstructs, influences, or impedes any 
        official proceeding, or attempts to do so,

shall be fined under this title or imprisoned not more than 20 years, or 
both.''.

SEC. 1103. TEMPORARY FREEZE AUTHORITY FOR THE SECURITIES AND EXCHANGE 
            COMMISSION.

    (a) In General.--Section 21C(c) of the Securities Exchange Act of 
1934 (15 U.S.C. 78u-3(c)) is amended by adding at the end the following:
            ``(3) Temporary freeze.--
                    ``(A) In general.--
                          ``(i) Issuance of temporary order.--Whenever, 
                      during the course of a lawful investigation 
                      involving possible violations of the Federal 
                      securities laws by an issuer of publicly traded 
                      securities or any of its directors, officers, 
                      partners, controlling persons, agents, or 
                      employees, it shall appear to the Commission that 
                      it is likely that the issuer will make 
                      extraordinary payments (whether compensation or 
                      otherwise) to any of the foregoing persons, the 
                      Commission may petition a Federal district court 
                      for a temporary order requiring the issuer to 
                      escrow, subject to court supervision, those 
                      payments in an interest-bearing account for 45 
                      days.
                          ``(ii) Standard.--A temporary order shall be 
                      entered under clause (i), only after notice and 
                      opportunity for a hearing, unless the court 
                      determines that

[[Page 116 STAT. 808]]

                      notice and hearing prior to entry of the order 
                      would be impracticable or contrary to the public 
                      interest.
                          ``(iii) Effective period.--A temporary order 
                      issued under clause (i) shall--
                                    ``(I) become effective immediately;
                                    ``(II) be served upon the parties 
                                subject to it; and
                                    ``(III) unless set aside, limited or 
                                suspended by a court of competent 
                                jurisdiction, shall remain effective and 
                                enforceable for 45 days.
                          ``(iv) Extensions authorized.--The effective 
                      period of an order under this subparagraph may be 
                      extended by the court upon good cause shown for 
                      not longer than 45 additional days, provided that 
                      the combined period of the order shall not exceed 
                      90 days.
                    ``(B) Process on Determination of violations.--
                          ``(i) Violations charged.--If the issuer or 
                      other person described in subparagraph (A) is 
                      charged with any violation of the Federal 
                      securities laws before the expiration of the 
                      effective period of a temporary order under 
                      subparagraph (A) (including any applicable 
                      extension period), the order shall remain in 
                      effect, subject to court approval, until the 
                      conclusion of any legal proceedings related 
                      thereto, and the affected issuer or other person, 
                      shall have the right to petition the court for 
                      review of the order.
                          ``(ii) Violations not charged.--If the issuer 
                      or other person described in subparagraph (A) is 
                      not charged with any violation of the Federal 
                      securities laws before the expiration of the 
                      effective period of a temporary order under 
                      subparagraph (A) (including any applicable 
                      extension period), the escrow shall terminate at 
                      the expiration of the 45-day effective period (or 
                      the expiration of any extension period, as 
                      applicable), and the disputed payments (with 
                      accrued interest) shall be returned to the issuer 
                      or other affected person.''.

    (b) Technical Amendment.--Section 21C(c)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is amended by striking 
``This'' and inserting ``paragraph (1)''.

SEC. 1104. <<NOTE: 28 USC 994 note.>> AMENDMENT TO THE FEDERAL 
            SENTENCING GUIDELINES.

    (a) Request for Immediate Consideration by The United States 
Sentencing Commission.--Pursuant to its authority under section 994(p) 
of title 28, United States Code, and in accordance with this section, 
the United States Sentencing Commission is requested to--
            (1) promptly review the sentencing guidelines applicable to 
        securities and accounting fraud and related offenses;
            (2) expeditiously consider the promulgation of new 
        sentencing guidelines or amendments to existing sentencing 
        guidelines to provide an enhancement for officers or directors 
        of publicly traded corporations who commit fraud and related 
        offenses; and
            (3) submit to Congress an explanation of actions taken by 
        the Sentencing Commission pursuant to paragraph (2) and

[[Page 116 STAT. 809]]

        any additional policy recommendations the Sentencing Commission 
        may have for combating offenses described in paragraph (1).

    (b) Considerations in Review.--In carrying out this section, the 
Sentencing Commission is requested to--
            (1) ensure that the sentencing guidelines and policy 
        statements reflect the serious nature of securities, pension, 
        and accounting fraud and the need for aggressive and appropriate 
        law enforcement action to prevent such offenses;
            (2) assure reasonable consistency with other relevant 
        directives and with other guidelines;
            (3) account for any aggravating or mitigating circumstances 
        that might justify exceptions, including circumstances for which 
        the sentencing guidelines currently provide sentencing 
        enhancements;
            (4) ensure that guideline offense levels and enhancements 
        for an obstruction of justice offense are adequate in cases 
        where documents or other physical evidence are actually 
        destroyed or fabricated;
            (5) ensure that the guideline offense levels and 
        enhancements under United States Sentencing Guideline 2B1.1 (as 
        in effect on the date of enactment of this Act) are sufficient 
        for a fraud offense when the number of victims adversely 
        involved is significantly greater than 50;
            (6) make any necessary conforming changes to the sentencing 
        guidelines; and
            (7) assure that the guidelines adequately meet the purposes 
        of sentencing as set forth in section 3553 (a)(2) of title 18, 
        United States Code.

    (c) Emergency Authority and Deadline For Commission Action.--The 
United <<NOTE: Deadline.>> States Sentencing Commission is requested to 
promulgate the guidelines or amendments provided for under this section 
as soon as practicable, and in any event not later than the 180 days 
after the date of enactment of this Act, in accordance with the 
procedures sent forth in section 21(a) of the Sentencing Reform Act of 
1987, as though the authority under that Act had not expired.

SEC. 1105. AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS FROM SERVING 
            AS OFFICERS OR DIRECTORS.

    (a) Securities Exchange Act of 1934.--Section 21C of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-3) is amended by adding at the end 
the following:
    ``(f) Authority of the Commission to Prohibit Persons From Serving 
as Officers or Directors.--In any cease-and-desist proceeding under 
subsection (a), the Commission may issue an order to prohibit, 
conditionally or unconditionally, and permanently or for such period of 
time as it shall determine, any person who has violated section 10(b) or 
the rules or regulations thereunder, from acting as an officer or 
director of any issuer that has a class of securities registered 
pursuant to section 12, or that is required to file reports pursuant to 
section 15(d), if the conduct of that person demonstrates unfitness to 
serve as an officer or director of any such issuer.''.
    (b) Securities Act of 1933.--Section 8A of the Securities Act of 
1933 (15 U.S.C. 77h-1) is amended by adding at the end of the following:

[[Page 116 STAT. 810]]

    ``(f) Authority of the Commission to Prohibit Persons From Serving 
as Officers or Directors.--In any cease-and-desist proceeding under 
subsection (a), the Commission may issue an order to prohibit, 
conditionally or unconditionally, and permanently or for such period of 
time as it shall determine, any person who has violated section 17(a)(1) 
or the rules or regulations thereunder, from acting as an officer or 
director of any issuer that has a class of securities registered 
pursuant to section 12 of the Securities Exchange Act of 1934, or that 
is required to file reports pursuant to section 15(d) of that Act, if 
the conduct of that person demonstrates unfitness to serve as an officer 
or director of any such issuer.''.

SEC. 1106. INCREASED CRIMINAL PENALTIES UNDER SECURITIES EXCHANGE ACT OF 
            1934.

    Section 32(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78ff(a)) is amended--
            (1) by striking ``$1,000,000, or imprisoned not more than 10 
        years'' and inserting ``$5,000,000, or imprisoned not more than 
        20 years''; and
            (2) by striking ``$2,500,000'' and inserting 
        ``$25,000,000''.

SEC. 1107. RETALIATION AGAINST INFORMANTS.

    (a) In General.--Section 1513 of title 18, United States Code, is 
amended by adding at the end the following:
    ``(e) <<NOTE: Penalties.>> Whoever knowingly, with the intent to 
retaliate, takes any action harmful to any person, including 
interference with the lawful employment or livelihood of any person, for 
providing to a law enforcement officer any truthful information relating 
to the commission or possible commission of any Federal offense, shall 
be fined under this title or imprisoned not more than 10 years, or 
both.''.

    Approved July 30, 2002.

LEGISLATIVE HISTORY--H.R. 3763 (S. 2673):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 107-414 (Comm. on Financial Services) and 107-610 
(Comm. of Conference).
SENATE REPORTS: No. 107-205 accompanying S. 2673 (Comm. on Banking, 
Housing, and Urban Affairs).
CONGRESSIONAL RECORD, Vol. 148 (2002):
            Apr. 24, considered and passed House.
            July 15, considered and passed Senate, amended, in lieu of 
                S. 2673.
            July 25, House and Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 38 (2002):
            July 30, Presidential remarks and statement.

                                  <all>


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