US (United States) Code. Title 15. Chapter 98: Public Company Accounting Reform and Corporate Responsability

Codificación normativa de EEUU (Estados Unidos). Legislación federal estadounidense # Commerce and Trade

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  • País: Estados Unidos Estados Unidos
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-CITE-

15 USC CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND

CORPORATE RESPONSIBILITY 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

.

-HEAD-

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

-MISC1-

Sec.

7201. Definitions.

7202. Commission rules and enforcement.

(a) Regulatory action.

(b) Enforcement.

(c) Effect on Commission authority.

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

7211. Establishment; administrative provisions.

(a) Establishment of Board.

(b) Status.

(c) Duties of the Board.

(d) Commission determination.

(e) Board membership.

(f) Powers of the Board.

(g) Rules of the Board.

(h) Annual report to the Commission.

7212. Registration with the Board.

(a) Mandatory registration.

(b) Applications for registration.

(c) Action on applications.

(d) Periodic reports.

(e) Public availability.

(f) Registration and annual fees.

7213. Auditing, quality control, and independence standards and

rules.

(a) Auditing, quality control, and ethics standards.

(b) Independence standards and rules.

(c) Cooperation with designated professional groups

of accountants and advisory groups.

(d) Evaluation of standard setting process.

7214. Inspections of registered public accounting firms.

(a) In general.

(b) Inspection frequency.

(c) Procedures.

(d) Conduct of inspections.

(e) Record retention.

(f) Procedures for review.

(g) Report.

(h) Interim Commission review.

7215. Investigations and disciplinary proceedings.

(a) In general.

(b) Investigations.

(c) Disciplinary procedures.

(d) Reporting of sanctions.

(e) Stay of sanctions.

7216. Foreign public accounting firms.

(a) Applicability to certain foreign firms.

(b) Production of audit workpapers.

(c) Exemption authority.

(d) Definition.

7217. Commission oversight of the Board.

(a) General oversight responsibility.

(b) Rules of the Board.

(c) Commission review of disciplinary action taken by

the Board.

(d) Censure of the Board; other sanctions.

7218. Accounting standards.

(a) Omitted.

(b) Commission authority.

(c) No effect on Commission powers.

(d) Study and report on adopting principles-based

accounting.

7219. Funding.

(a) In general.

(b) Annual budgets.

(c) Sources and uses of funds.

(d) Annual accounting support fee for the Board.

(e) Annual accounting support fee for standard

setting body.

(f) Limitation on fee.

(g) Allocation of accounting support fees among

issuers.

(h) Omitted.

(i) Rule of construction.

(j) Start-up expenses of the Board.

SUBCHAPTER II - AUDITOR INDEPENDENCE

7231. Exemption authority.

7232. Study of mandatory rotation of registered public accounting

firms.

(a) Study and review required.

(b) Report required.

(c) Definition.

7233. Commission authority.

(a) Commission regulations.

(b) Auditor independence.

7234. Considerations by appropriate State regulatory authorities.

SUBCHAPTER III - CORPORATE RESPONSIBILITY

7241. Corporate responsibility for financial reports.

(a) Regulations required.

(b) Foreign reincorporations have no effect.

(c) Deadline.

7242. Improper influence on conduct of audits.

(a) Rules to prohibit.

(b) Enforcement.

(c) No preemption of other law.

(d) Deadline for rulemaking.

7243. Forfeiture of certain bonuses and profits.

(a) Additional compensation prior to noncompliance

with Commission financial reporting

requirements.

(b) Commission exemption authority.

7244. Insider trades during pension fund blackout periods.

(a) Prohibition of insider trading during pension

fund blackout periods.

(b) Notice requirements to participants and

beneficiaries under ERISA.

(c) Effective date.

7245. Rules of professional responsibility for attorneys.

7246. Fair funds for investors.

(a) Civil penalties added to disgorgement funds for

the relief of victims.

(b) Acceptance of additional donations.

(c) Study required.

(d) Omitted.

(e) Definition.

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

7261. Disclosures in periodic reports.

(a) Omitted.

(b) Commission rules on pro forma figures.

(c) Study and report on special purpose entities.

7262. Management assessment of internal controls.

(a) Rules required.

(b) Internal control evaluation and reporting.

7263. Exemption.

7264. Code of ethics for senior financial officers.

(a) Code of ethics disclosure.

(b) Changes in codes of ethics.

(c) Definition.

(d) Deadline for rulemaking.

7265. Disclosure of audit committee financial expert.

(a) Rules defining ''financial expert''.

(b) Considerations.

(c) Deadline for rulemaking.

7266. Enhanced review of periodic disclosures by issuers.

(a) Regular and systematic review.

(b) Review criteria.

(c) Minimum review period.

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15 USC Sec. 7201 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

-HEAD-

Sec. 7201. Definitions

-STATUTE-

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 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 7213 of this title, 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 7211 of this title.

(6) Commission

The term ''Commission'' means the Securities and Exchange

Commission.

(7) Issuer

The term ''issuer'' means an issuer (as defined in section 78c

of this title), the securities of which are registered under

section 78l of this title, or that is required to file reports

under section 78o(d) of this title, 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 -

(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 (15 U.S.C.

77s(b)), or prescribed by the Commission under section 19(a)

of that Act (15 U.S.C. 77s(a)) or section 78m(b) of this

title; 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

7213(a) of this title, 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 7217 of this title),

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 78c(a)

of this title.

(15) Securities laws

The term ''securities laws'' means the provisions of law

referred to in section 78c(a)(47) of this title 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.

-SOURCE-

(Pub. L. 107-204, Sec. 2(a), July 30, 2002, 116 Stat. 746.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in text, is Pub. L. 107-204, July 30, 2002,

116 Stat. 745, known as the Sarbanes-Oxley Act of 2002. For

complete classification of this Act to the Code, see Tables.

The Securities Act of 1933, referred to in par. (7), is title I

of act May 27, 1933, ch. 38, 48 Stat. 74, as amended, which is

classified generally to subchapter I (Sec. 77a et seq.) of chapter

2A of this title. For complete classification of this Act to the

Code, see section 77a of this title and Tables.

Title II, referred to in par. (10)(B), means title II of Pub. L.

107-204, July 30, 2002, 116 Stat. 771, which enacted subchapter II

of this chapter and amended sections 78c, 78j-1, 78l and 78q of

this title. For complete classification of title II to the Code,

see Tables.

-MISC2-

SHORT TITLE

Pub. L. 107-204, Sec. 1(a), July 30, 2002, 116 Stat. 745,

provided that: ''This Act (see Tables for classification) may be

cited as the 'Sarbanes-Oxley Act of 2002'.''

GAO STUDY AND REPORT REGARDING CONSOLIDATION OF PUBLIC ACCOUNTING

FIRMS

Pub. L. 107-204, title VII, Sec. 701, July 30, 2002, 116 Stat.

797, provided that:

''(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 later than 1 year after the date of

enactment of this Act (July 30, 2002), 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.''

-SECREF-

SARBANES-OXLEY ACT OF 2002 REFERRED TO IN OTHER SECTIONS

The Sarbanes-Oxley Act of 2002 (see Tables) is referred to in

sections 78c, 7201, 7202, 7211, 7213, 7214, 7215, 7216, 7217, 7218,

7234 of this title.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78c, 78m, 78u-3 of this

title.

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15 USC Sec. 7202 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

-HEAD-

Sec. 7202. Commission rules and enforcement

-STATUTE-

(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) to (4) Omitted

(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.

-SOURCE-

(Pub. L. 107-204, Sec. 3, July 30, 2002, 116 Stat. 749.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in text, is Pub. L. 107-204, July 30, 2002,

116 Stat. 745, known as the Sarbanes-Oxley Act of 2002. For

complete classification of this Act to the Code, see Tables.

The Securities Exchange Act of 1934, referred to in subsec.

(b)(1), is act June 6, 1934, ch. 404, 48 Stat. 881, as amended,

which is classified principally to chapter 2B (Sec. 78a et seq.) of

this title. For complete classification of this Act to the Code,

see section 78a of this title and Tables.

-COD-

CODIFICATION

Section is comprised of section 3 of Pub. L. 107-204. Subsec.

(b)(2)-(4) of section 3 of Pub. L. 107-204 amended sections 78l,

78u, and 78u-3 of this title.

-CITE-

15 USC SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT

BOARD 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

.

-HEAD-

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-CITE-

15 USC Sec. 7211 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7211. Establishment; administrative provisions

-STATUTE-

(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 7217 of this title, 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 7212 of this title;

(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 7213 of this title;

(3) conduct inspections of registered public accounting firms,

in accordance with section 7214 of this title and the rules of

the Board;

(4) conduct investigations and disciplinary proceedings

concerning, and impose appropriate sanctions where justified

upon, registered public accounting firms and associated persons

of such firms, in accordance with section 7215 of this title;

(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 July 30, 2002, that the Board is so

organized and has the capacity to carry out the requirements of

this subchapter, and to enforce compliance with this subchapter 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 later than 90 days after July 30, 2002, the Commission,

after consultation with the Chairman of the Board of Governors

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 7217(d)(3) of this title, 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 7217

of this title -

(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 7219 of this title, for the

Board, and other fees and charges imposed under this subchapter;

and

(6) to 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 subchapter.

(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 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.

-SOURCE-

(Pub. L. 107-204, title I, Sec. 101, July 30, 2002, 116 Stat. 750.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in subsecs. (b), (c)(5), (6), (f), and

(g)(1), (4), is Pub. L. 107-204, July 30, 2002, 116 Stat. 745,

known as the Sarbanes-Oxley Act of 2002. For complete

classification of this Act to the Code, see Tables.

The District of Columbia Nonprofit Corporation Act, referred to

in subsec. (b), is Pub. L. 87-569, Aug. 6, 1962, 76 Stat. 265, as

amended, which is not classified to the Code.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78j-1, 7201, 7212, 7213,

7219 of this title.

-CITE-

15 USC Sec. 7212 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7212. Registration with the Board

-STATUTE-

(a) Mandatory registration

Beginning 180 days after the date of the determination of the

Commission under section 7211(d) of this title, 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;

(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

subchapter (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 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 7215(d) and

7217(c) of this title.

(d) Periodic reports

Each registered public accounting firm shall submit an annual

report to the Board, and may be required 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) of this section.

(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.

-SOURCE-

(Pub. L. 107-204, title I, Sec. 102, July 30, 2002, 116 Stat. 753.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 7211, 7216, 7219 of this

title.

-CITE-

15 USC Sec. 7213 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7213. Auditing, quality control, and independence standards

and rules

-STATUTE-

(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 7262(b) of this

title, and present (in such report or in a separate report) -

(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) of this section.

(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

7217 of this title, 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

Commission under section 7211(d) of this title, and such

standards shall be separately approved by the Commission at the

time of that determination, without regard to the procedures

required by section 7217 of this title 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) of

this section and advisory groups convened under subsection (a)(4)

of this section in the examination of the need for changes in any

standards subject to its authority under subsection (a) of this

section, 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

7211(h) of this title 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) of this section, and

its pending issues agenda for future standard setting projects.

-SOURCE-

(Pub. L. 107-204, title I, Sec. 103, July 30, 2002, 116 Stat. 755.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in subsec. (a)(1), is Pub. L. 107-204, July

30, 2002, 116 Stat. 745, known as the Sarbanes-Oxley Act of 2002.

For complete classification of this Act to the Code, see Tables.

Title II of this Act, referred to in subsec. (b), is title II of

Pub. L. 107-204, July 30, 2002, 116 Stat. 771, which enacted

subchapter II of this chapter and amended sections 78c, 78j-1, 78l,

and 78q of this title. For complete classification of title II to

the Code, see Tables.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 7201, 7211, 7214, 7217 of

this title.

-CITE-

15 USC Sec. 7214 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7214. Inspections of registered public accounting firms

-STATUTE-

(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

(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 7213 of this title

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) of this section,

shall be -

(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 7215(b)(5)(A) of this title, 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) of this section, 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) of this section.

(2) Treatment of review

Any decision of the Commission with respect to a review under

paragraph (1) shall not be reviewable under section 78y of this

title, or deemed to be ''final agency action'' for purposes of

section 704 of title 5.

(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).

-SOURCE-

(Pub. L. 107-204, title I, Sec. 104, July 30, 2002, 116 Stat. 757.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in subsecs. (a), (b), and (c), is Pub. L.

107-204, July 30, 2002, 116 Stat. 745, known as the Sarbanes-Oxley

Act of 2002. For complete classification of this Act to the Code,

see Tables.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 7211, 7215 of this title.

-CITE-

15 USC Sec. 7215 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7215. Investigations and disciplinary proceedings

-STATUTE-

(a) In general

The 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.

(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 7217(c) of this title.

(4) Coordination and referral of investigations

(A) Coordination

The 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;

(ii) to any other Federal functional regulator (as defined

in section 6809 of this title), 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 7214 of

this title 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), (FOOTNOTE 1) or otherwise, unless and until presented in

connection with a public proceeding or released in accordance

with subsection (c) of this section.

(FOOTNOTE 1) See References in Text note below.

(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 6809 of this title), 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 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 subchapter;

(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.

(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

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.

-SOURCE-

(Pub. L. 107-204, title I, Sec. 105, July 30, 2002, 116 Stat. 759.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in subsecs. (b)(1), (5)(B)(ii), (6) and

(c)(3)(B), (4), (6)(A), is Pub. L. 107-204, July 30, 2002, 116

Stat. 745, known as the Sarbanes-Oxley Act of 2002. For complete

classification of this Act to the Code, see Tables.

The Freedom of Information Act, referred to in subsec. (b)(5)(A),

is section 552 of Title 5, Government Organization and Employees.

Section 552a of Title 5 is commonly known as the ''Privacy Act''.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 7211, 7212, 7214, 7217 of

this title.

-CITE-

15 USC Sec. 7216 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7216. Foreign public accounting firms

-STATUTE-

(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 7212 of this title 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 (or firms) for

purposes of registration under, and oversight by the Board in

accordance with, this subchapter.

(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.

-SOURCE-

(Pub. L. 107-204, title I, Sec. 106, July 30, 2002, 116 Stat. 764.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in subsecs. (a) and (c), is Pub. L.

107-204, July 30, 2002, 116 Stat. 745, known as the Sarbanes-Oxley

Act of 2002. For complete classification of this Act to the Code,

see Tables.

-CITE-

15 USC Sec. 7217 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7217. Commission oversight of the Board

-STATUTE-

(a) General oversight responsibility

The Commission shall have oversight and enforcement authority

over the Board, as provided in this Act. The provisions of section

78q(a)(1) of this title, and of section 78q(b)(1) of this title

shall apply to the Board as fully as if the Board were a

''registered securities association'' for purposes of those

sections 78q(a)(1) and 78q(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 7213(a)(3)(B) of this title with

respect to initial or transitional standards.

(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 78s(b)

of this title shall govern the proposed rules of the Board, as

fully as if the Board were a ''registered securities

association'' for purposes of that section 78s(b), except that,

for purposes of this paragraph -

(A) the phrase ''consistent with the requirements of this

chapter and the rules and regulations thereunder applicable to

such organization'' in section 78s(b)(2) of this title 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 chapter'' in section 78s(b)(3)(C) of this title 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 78s(c) of this title 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 78s(c), except that the phrase ''to conform its rules to

the requirements of this chapter and the rules and regulations

thereunder applicable to such organization, or otherwise in

furtherance of the purposes of this chapter'' in section 78s(c)

of this title 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 78s(d)(2) and 78s(e)(1) of this

title shall govern the review by the Commission of final

disciplinary sanctions imposed by the Board (including sanctions

imposed under section 7215(b)(3) of this title 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 78s(d)(2) and 78s(e)(1), except that, for

purposes of this paragraph -

(A) section 7215(e) of this title (rather than that section

78s(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 78s(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

chapter'' in that section 78s(e)(1) shall be deemed to read

''consistent with the purposes of this chapter and title I of

the Sarbanes-Oxley Act of 2002'';

(D) references to rules of the Municipal Securities

Rulemaking Board in that section 78s(e)(1) shall not apply; and

(E) the reference to section 78s(e)(2) of this title shall

refer instead to section 7217(c)(3) of this title.

(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 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.

-SOURCE-

(Pub. L. 107-204, title I, Sec. 107, July 30, 2002, 116 Stat. 765.)

-REFTEXT-

REFERENCES IN TEXT

This Act and the Sarbanes-Oxley Act of 2002, referred to in text,

are Pub. L. 107-204, July 30, 2002, 116 Stat. 745. Title I of the

Act is classified generally to this subchapter. For complete

classification of this Act to the Code, see Tables.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 7201, 7211, 7212, 7213,

7215, 7231 of this title.

-CITE-

15 USC Sec. 7218 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7218. Accounting standards

-STATUTE-

(a) Omitted

(b) Commission authority

The Commission shall promulgate such rules and regulations to

carry out section 77s(b) of this title 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 July 30, 2002, 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.

-SOURCE-

(Pub. L. 107-204, title I, Sec. 108, July 30, 2002, 116 Stat. 768.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in subsec. (c), is Pub. L. 107-204, July

30, 2002, 116 Stat. 745, known as the Sarbanes-Oxley Act of 2002.

For complete classification of this Act to the Code, see Tables.

-COD-

CODIFICATION

Section is comprised of section 108 of Pub. L. 107-204. Subsec.

(a) of section 108 of Pub. L. 107-204 amended section 77s of this

title.

-CITE-

15 USC Sec. 7219 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

-HEAD-

Sec. 7219. Funding

-STATUTE-

(a) In general

The Board, and the standard setting body designated pursuant to

section 77s(b) of this title, shall be funded as provided in this

section.

(b) Annual budgets

The Board and the standard setting body referred to in subsection

(a) of this section 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

7211(d) of this title.

(c) Sources and uses of funds

(1) Recoverable budget expenses

The budget of the Board (reduced by any registration or annual

fees received under section 7212(e) of this title 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) of this section, 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) of this

section. 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) of this section, 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)

of this section, 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) of this section -

(1) shall be allocated in accordance with subsection (g) of

this section, 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) of this

section.

(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) of this section shall be

allocated among and payable by each issuer (or each issuer in 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) Omitted

(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) of

this section, 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).

-SOURCE-

(Pub. L. 107-204, title I, Sec. 109, July 30, 2002, 116 Stat. 769.)

-COD-

CODIFICATION

Section is comprised of section 109 of Pub. L. 107-204. Subsec.

(h) of section 109 of Pub. L. 107-204 amended section 78m of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 77s, 78m, 7211 of this

title.

-CITE-

15 USC SUBCHAPTER II - AUDITOR INDEPENDENCE 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER II - AUDITOR INDEPENDENCE

.

-HEAD-

SUBCHAPTER II - AUDITOR INDEPENDENCE

-CITE-

15 USC Sec. 7231 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER II - AUDITOR INDEPENDENCE

-HEAD-

Sec. 7231. Exemption authority

-STATUTE-

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 78j-1(g) of this title,

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 7217 of this title.

-SOURCE-

(Pub. L. 107-204, title II, Sec. 201(b), July 30, 2002, 116 Stat.

772.)

-CITE-

15 USC Sec. 7232 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER II - AUDITOR INDEPENDENCE

-HEAD-

Sec. 7232. Study of mandatory rotation of registered public

accounting firms

-STATUTE-

(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 later than 1 year after July 30, 2002, 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.

-SOURCE-

(Pub. L. 107-204, title II, Sec. 207, July 30, 2002, 116 Stat.

775.)

-CITE-

15 USC Sec. 7233 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER II - AUDITOR INDEPENDENCE

-HEAD-

Sec. 7233. Commission authority

-STATUTE-

(a) Commission regulations

Not later than 180 days after July 30, 2002, the Commission shall

issue final regulations to carry out each of subsections (g)

through (l) of section 78j-1 of 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

78j-1 of this title or any rule or regulation of the Commission or

of the Board issued thereunder.

-SOURCE-

(Pub. L. 107-204, title II, Sec. 208, July 30, 2002, 116 Stat.

775.)

-CITE-

15 USC Sec. 7234 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER II - AUDITOR INDEPENDENCE

-HEAD-

Sec. 7234. Considerations by appropriate State regulatory

authorities

-STATUTE-

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.

-SOURCE-

(Pub. L. 107-204, title II, Sec. 209, July 30, 2002, 116 Stat.

775.)

-REFTEXT-

REFERENCES IN TEXT

This Act, referred to in text, is Pub. L. 107-204, July 30, 2002,

116 Stat. 745, known as the Sarbanes-Oxley Act of 2002. For

complete classification of this Act to the Code, see Tables.

-CITE-

15 USC SUBCHAPTER III - CORPORATE RESPONSIBILITY 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER III - CORPORATE RESPONSIBILITY

.

-HEAD-

SUBCHAPTER III - CORPORATE RESPONSIBILITY

-CITE-

15 USC Sec. 7241 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER III - CORPORATE RESPONSIBILITY

-HEAD-

Sec. 7241. Corporate responsibility for financial reports

-STATUTE-

(a) Regulations required

The Commission shall, by rule, require, for each company filing

periodic reports under section 78m(a) or 78o(d) of this title, 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 this title 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.

(b) Foreign reincorporations have no effect

Nothing in this section shall be interpreted or applied in any

way to allow any issuer to lessen the legal force of the statement

required under this section, 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) of this section shall be

effective not later than 30 days after July 30, 2002.

-SOURCE-

(Pub. L. 107-204, title III, Sec. 302, July 30, 2002, 116 Stat.

777.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78l of this title.

-CITE-

15 USC Sec. 7242 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER III - CORPORATE RESPONSIBILITY

-HEAD-

Sec. 7242. Improper influence on conduct of audits

-STATUTE-

(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) of this section 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 July 30, 2002; and

(2) issue final rules or regulations required by this section,

not later than 270 days after July 30, 2002.

-SOURCE-

(Pub. L. 107-204, title III, Sec. 303, July 30, 2002, 116 Stat.

778.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78l of this title.

-CITE-

15 USC Sec. 7243 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER III - CORPORATE RESPONSIBILITY

-HEAD-

Sec. 7243. Forfeiture of certain bonuses and profits

-STATUTE-

(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) of this section, as it deems necessary and

appropriate.

-SOURCE-

(Pub. L. 107-204, title III, Sec. 304, July 30, 2002, 116 Stat.

778.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78l of this title.

-CITE-

15 USC Sec. 7244 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER III - CORPORATE RESPONSIBILITY

-HEAD-

Sec. 7244. Insider trades during pension fund blackout periods

-STATUTE-

(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 title 26 to the extent

necessary to clarify the application of such requirements and to

prevent evasion thereof. Such rules may also provide for

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 1002(34) of title 29,

except that such term shall not include a one-participant

retirement plan (within the meaning of section 1021(i)(8)(B) of

title 29).

(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) Omitted

(2) Issuance of initial guidance and model notice

The Secretary of Labor shall issue initial guidance and a model

notice pursuant to section 1021(i)(6) of title 29 not later than

January 1, 2003. Not later than 75 days after July 30, 2002, the

Secretary shall promulgate interim final rules necessary to carry

out the amendments made by this subsection.

(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 July 30, 2002. 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.

-SOURCE-

(Pub. L. 107-204, title III, Sec. 306, July 30, 2002, 116 Stat.

779.)

-REFTEXT-

REFERENCES IN TEXT

For amendments made by this subsection and this section, referred

to in subsecs. (b) and (c), see Codification note below.

-COD-

CODIFICATION

Section is comprised of section 306 of Pub. L. 107-204. Subsec.

(b)(1) of section 306 of Pub. L. 107-204 amended section 1021 of

Title 29, Labor, and another par. (3) of subsec. (b) amended

section 1132 of Title 29.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78l of this title.

-CITE-

15 USC Sec. 7245 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER III - CORPORATE RESPONSIBILITY

-HEAD-

Sec. 7245. Rules of professional responsibility for attorneys

-STATUTE-

Not later than 180 days after July 30, 2002, 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.

-SOURCE-

(Pub. L. 107-204, title III, Sec. 307, July 30, 2002, 116 Stat.

784.)

-CITE-

15 USC Sec. 7246 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER III - CORPORATE RESPONSIBILITY

-HEAD-

Sec. 7246. Fair funds for investors

-STATUTE-

(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 78c(a)(47) of this title) 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 States for a disgorgement fund described in

subsection (a) of this section. 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) of this section.

(c) Study required

(1) Subject of study

The Commission shall review and analyze -

(A) enforcement actions by the Commission over the five years

preceding July 30, 2002, 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 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 (FOOTNOTE 1) July 30, 2002, 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.

(FOOTNOTE 1) So in original. The word ''of'' probably should

not appear.

(d) Omitted

(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) of this section.

-SOURCE-

(Pub. L. 107-204, title III, Sec. 308, July 30, 2002, 116 Stat.

784.)

-COD-

CODIFICATION

Section is comprised of section 308 of Pub. L. 107-204. Subsec.

(d) of section 308 of Pub. L. 107-204 amended sections 77t, 78u,

78u-1, 80a-41, and 80b-9 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 77t, 78u, 78u-1, 80a-41,

80b-9 of this title.

-CITE-

15 USC SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

.

-HEAD-

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

-CITE-

15 USC Sec. 7261 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

-HEAD-

Sec. 7261. Disclosures in periodic reports

-STATUTE-

(a) Omitted

(b) Commission rules on pro forma figures

Not later than 180 days after July 30, 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 Commission shall, not later than 1 year after the effective

date of adoption of off-balance sheet disclosure rules required

by section 78m(j) of this title, 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 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 78m or 78o of this

title;

(B) the extent to which special purpose entities are used to

facilitate off-balance sheet transactions;

(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.

-SOURCE-

(Pub. L. 107-204, title IV, Sec. 401, July 30, 2002, 116 Stat.

785.)

-COD-

CODIFICATION

Section is comprised of section 401 of Pub. L. 107-204. Subsec.

(a) of section 401 of Pub. L. 107-204 amended section 78m of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78l of this title.

-CITE-

15 USC Sec. 7262 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

-HEAD-

Sec. 7262. Management assessment of internal controls

-STATUTE-

(a) Rules required

The Commission shall prescribe rules requiring each annual report

required by section 78m(a) or 78o(d) of this title 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) of this section, 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.

-SOURCE-

(Pub. L. 107-204, title IV, Sec. 404, July 30, 2002, 116 Stat.

789.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78l, 7213 of this title.

-CITE-

15 USC Sec. 7263 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

-HEAD-

Sec. 7263. Exemption

-STATUTE-

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 80a-8 of

this title.

-SOURCE-

(Pub. L. 107-204, title IV, Sec. 405, July 30, 2002, 116 Stat.

789.)

-REFTEXT-

REFERENCES IN TEXT

Sections 401, 402, and 404, referred to in text, mean sections

401, 402, and 404 of Pub. L. 107-204. Section 401 enacted section

7261 of this title and amended section 78m of this title. Section

402 amended section 78m of this title. Section 404 enacted section

7262 of this title.

-CITE-

15 USC Sec. 7264 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

-HEAD-

Sec. 7264. Code of ethics for senior financial officers

-STATUTE-

(a) Code of ethics disclosure

The Commission shall issue rules to require each issuer, together

with periodic reports required pursuant to section 78m(a) or 78o(d)

of this title, 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 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;

(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 July 30, 2002; and

(2) issue final rules to implement this section, not later than

180 days after July 30, 2002.

-SOURCE-

(Pub. L. 107-204, title IV, Sec. 406, July 30, 2002, 116 Stat.

789.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78l of this title.

-CITE-

15 USC Sec. 7265 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

-HEAD-

Sec. 7265. Disclosure of audit committee financial expert

-STATUTE-

(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 78m(a) and 78o(d) of this title, 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) of this section, 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 July 30, 2002; and

(2) issue final rules to implement this section, not later than

180 days after July 30, 2002.

-SOURCE-

(Pub. L. 107-204, title IV, Sec. 407, July 30, 2002, 116 Stat.

790.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78l of this title.

-CITE-

15 USC Sec. 7266 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 98 - PUBLIC COMPANY ACCOUNTING REFORM AND CORPORATE

RESPONSIBILITY

SUBCHAPTER IV - ENHANCED FINANCIAL DISCLOSURES

-HEAD-

Sec. 7266. Enhanced review of periodic disclosures by issuers

-STATUTE-

(a) Regular and systematic review

The Commission shall review disclosures made by issuers reporting

under section 78m(a) of this title (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)

of this section, 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;

(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 78m(a) or 78o(d) of this title be reviewed under this

section less frequently than once every 3 years.

-SOURCE-

(Pub. L. 107-204, title IV, Sec. 408, July 30, 2002, 116 Stat.

790.)

-CITE-