[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3763 Enrolled Bill (ENR)]

        H.R.3763

                      One Hundred Seventh Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

         Begun and held at the City of Washington on Wednesday,
          the twenty-third day of January, two thousand and two


                                 An Act


 
   To protect investors by improving the accuracy and reliability of 
  corporate disclosures made pursuant to the securities laws, and for 
                             other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Sarbanes-Oxley Act 
of 2002''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Commission rules and enforcement.

           TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

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

                     TITLE II--AUDITOR INDEPENDENCE

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

                   TITLE III--CORPORATE RESPONSIBILITY

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

                TITLE IV--ENHANCED FINANCIAL DISCLOSURES

Sec. 401. Disclosures in periodic reports.
Sec. 402. Enhanced conflict of interest provisions.
Sec. 403. Disclosures of transactions involving management and principal 
          stockholders.
Sec. 404. Management assessment of internal controls.
Sec. 405. Exemption.
Sec. 406. Code of ethics for senior financial officers.
Sec. 407. Disclosure of audit committee financial expert.
Sec. 408. Enhanced review of periodic disclosures by issuers.
Sec. 409. Real time issuer disclosures.

                 TITLE V--ANALYST CONFLICTS OF INTEREST

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

              TITLE VI--COMMISSION RESOURCES AND AUTHORITY

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

                     TITLE VII--STUDIES AND REPORTS

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

         TITLE VIII--CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY

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

            TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

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

                     TITLE X--CORPORATE TAX RETURNS

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

              TITLE XI--CORPORATE FRAUD AND ACCOUNTABILITY

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

SEC. 2. DEFINITIONS.

    (a) In General.--In this Act, the following definitions shall 
apply:
        (1) Appropriate state regulatory authority.--The term 
    ``appropriate State regulatory authority'' means the State agency 
    or other authority responsible for the licensure or other 
    regulation of the practice of accounting in the State or States 
    having jurisdiction over a registered public accounting firm or 
    associated person thereof, with respect to the matter in question.
        (2) Audit.--The term ``audit'' means an examination of the 
    financial statements of any issuer by an independent public 
    accounting firm in accordance with the rules of the Board or the 
    Commission (or, for the period preceding the adoption of applicable 
    rules of the Board under section 103, in accordance with then-
    applicable generally accepted auditing and related standards for 
    such purposes), for the purpose of expressing an opinion on such 
    statements.
        (3) Audit committee.--The term ``audit committee'' means--
            (A) a committee (or equivalent body) established by and 
        amongst the board of directors of an issuer for the purpose of 
        overseeing the accounting and financial reporting processes of 
        the issuer and audits of the financial statements of the 
        issuer; and
            (B) if no such committee exists with respect to an issuer, 
        the entire board of directors of the issuer.
        (4) Audit report.--The term ``audit report'' means a document 
    or other record--
            (A) prepared following an audit performed for purposes of 
        compliance by an issuer with the requirements of the securities 
        laws; and
            (B) in which a public accounting firm either--
                (i) sets forth the opinion of that firm regarding a 
            financial statement, report, or other document; or
                (ii) asserts that no such opinion can be expressed.
        (5) Board.--The term ``Board'' means the Public Company 
    Accounting Oversight Board established under section 101.
        (6) Commission.--The term ``Commission'' means the Securities 
    and Exchange Commission.
        (7) Issuer.--The term ``issuer'' means an issuer (as defined in 
    section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)), 
    the securities of which are registered under section 12 of that Act 
    (15 U.S.C. 78l), or that is required to file reports under section 
    15(d) (15 U.S.C. 78o(d)), or that files or has filed a registration 
    statement that has not yet become effective under the Securities 
    Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn.
        (8) Non-audit services.--The term ``non-audit services'' means 
    any professional services provided to an issuer by a registered 
    public accounting firm, other than those provided to an issuer in 
    connection with an audit or a review of the financial statements of 
    an issuer.
        (9) Person associated with a public accounting firm.--
            (A) In general.--The terms ``person associated with a 
        public accounting firm'' (or with a ``registered public 
        accounting firm'') and ``associated person of a public 
        accounting firm'' (or of a ``registered public accounting 
        firm'') mean any individual proprietor, partner, shareholder, 
        principal, accountant, or other professional employee of a 
        public accounting firm, or any other independent contractor or 
        entity that, in connection with the preparation or issuance of 
        any audit report--
                (i) shares in the profits of, or receives compensation 
            in any other form from, that firm; or
                (ii) participates as agent or otherwise on behalf of 
            such accounting firm in any activity of that firm.
            (B) Exemption authority.--The Board may, by rule, exempt 
        persons engaged only in ministerial tasks from the definition 
        in subparagraph (A), to the extent that the Board determines 
        that any such exemption is consistent with the purposes of this 
        Act, the public interest, or the protection of investors.
        (10) Professional standards.--The term ``professional 
    standards'' means--
            (A) accounting principles that are--
                (i) established by the standard setting body described 
            in section 19(b) of the Securities Act of 1933, as amended 
            by this Act, or prescribed by the Commission under section 
            19(a) of that Act (15 U.S.C. 17a(s)) or section 13(b) of 
            the Securities Exchange Act of 1934 (15 U.S.C. 78a(m)); and
                (ii) relevant to audit reports for particular issuers, 
            or dealt with in the quality control system of a particular 
            registered public accounting firm; and
            (B) auditing standards, standards for attestation 
        engagements, quality control policies and procedures, ethical 
        and competency standards, and independence standards (including 
        rules implementing title II) that the Board or the Commission 
        determines--
                (i) relate to the preparation or issuance of audit 
            reports for issuers; and
                (ii) are established or adopted by the Board under 
            section 103(a), or are promulgated as rules of the 
            Commission.
        (11) Public accounting firm.--The term ``public accounting 
    firm'' means--
            (A) a proprietorship, partnership, incorporated 
        association, corporation, limited liability company, limited 
        liability partnership, or other legal entity that is engaged in 
        the practice of public accounting or preparing or issuing audit 
        reports; and
            (B) to the extent so designated by the rules of the Board, 
        any associated person of any entity described in subparagraph 
        (A).
        (12) Registered public accounting firm.--The term ``registered 
    public accounting firm'' means a public accounting firm registered 
    with the Board in accordance with this Act.
        (13) Rules of the board.--The term ``rules of the Board'' means 
    the bylaws and rules of the Board (as submitted to, and approved, 
    modified, or amended by the Commission, in accordance with section 
    107), and those stated policies, practices, and interpretations of 
    the Board that the Commission, by rule, may deem to be rules of the 
    Board, as necessary or appropriate in the public interest or for 
    the protection of investors.
        (14) Security.--The term ``security'' has the same meaning as 
    in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
    78c(a)).
        (15) Securities laws.--The term ``securities laws'' means the 
    provisions of law referred to in section 3(a)(47) of the Securities 
    Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), as amended by this 
    Act, and includes the rules, regulations, and orders issued by the 
    Commission thereunder.
        (16) State.--The term ``State'' means any State of the United 
    States, the District of Columbia, Puerto Rico, the Virgin Islands, 
    or any other territory or possession of the United States.
    (b) Conforming Amendment.--Section 3(a)(47) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) is amended by inserting 
``the Sarbanes-Oxley Act of 2002,'' before ``the Public''.

SEC. 3. COMMISSION RULES AND ENFORCEMENT.

    (a) Regulatory Action.--The Commission shall promulgate such rules 
and regulations, as may be necessary or appropriate in the public 
interest or for the protection of investors, and in furtherance of this 
Act.
    (b) Enforcement.--
        (1) In general.--A violation by any person of this Act, any 
    rule or regulation of the Commission issued under this Act, or any 
    rule of the Board shall be treated for all purposes in the same 
    manner as a violation of the Securities Exchange Act of 1934 (15 
    U.S.C. 78a et seq.) or the rules and regulations issued thereunder, 
    consistent with the provisions of this Act, and any such person 
    shall be subject to the same penalties, and to the same extent, as 
    for a violation of that Act or such rules or regulations.
        (2) Investigations, injunctions, and prosecution of offenses.--
    Section 21 of the Securities Exchange Act of 1934 (15 U.S.C. 78u) 
    is amended--
            (A) in subsection (a)(1), by inserting ``the rules of the 
        Public Company Accounting Oversight Board, of which such person 
        is a registered public accounting firm or a person associated 
        with such a firm,'' after ``is a participant,'';
            (B) in subsection (d)(1), by inserting ``the rules of the 
        Public Company Accounting Oversight Board, of which such person 
        is a registered public accounting firm or a person associated 
        with such a firm,'' after ``is a participant,'';
            (C) in subsection (e), by inserting ``the rules of the 
        Public Company Accounting Oversight Board, of which such person 
        is a registered public accounting firm or a person associated 
        with such a firm,'' after ``is a participant,''; and
            (D) in subsection (f), by inserting ``or the Public Company 
        Accounting Oversight Board'' after ``self-regulatory 
        organization'' each place that term appears.
        (3) Cease-and-desist proceedings.--Section 21C(c)(2) of the 
    Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is amended 
    by inserting ``registered public accounting firm (as defined in 
    section 2 of the Sarbanes-Oxley Act of 2002),'' after ``government 
    securities dealer,''.
        (4) Enforcement by federal banking agencies.--Section 12(i) of 
    the Securities Exchange Act of 1934 (15 U.S.C. 78l(i)) is amended 
    by--
            (A) striking ``sections 12,'' each place it appears and 
        inserting ``sections 10A(m), 12,''; and
            (B) striking ``and 16,'' each place it appears and 
        inserting ``and 16 of this Act, and sections 302, 303, 304, 
        306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 
        2002,''.
    (c) Effect on Commission Authority.--Nothing in this Act or the 
rules of the Board shall be construed to impair or limit--
        (1) the authority of the Commission to regulate the accounting 
    profession, accounting firms, or persons associated with such firms 
    for purposes of enforcement of the securities laws;
        (2) the authority of the Commission to set standards for 
    accounting or auditing practices or auditor independence, derived 
    from other provisions of the securities laws or the rules or 
    regulations thereunder, for purposes of the preparation and 
    issuance of any audit report, or otherwise under applicable law; or
        (3) the ability of the Commission to take, on the initiative of 
    the Commission, legal, administrative, or disciplinary action 
    against any registered public accounting firm or any associated 
    person thereof.

           TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

SEC. 101. ESTABLISHMENT; ADMINISTRATIVE PROVISIONS.

    (a) Establishment of Board.--There is established the Public 
Company Accounting Oversight Board, to oversee the audit of public 
companies that are subject to the securities laws, and related matters, 
in order to protect the interests of investors and further the public 
interest in the preparation of informative, accurate, and independent 
audit reports for companies the securities of which are sold to, and 
held by and for, public investors. The Board shall be a body corporate, 
operate as a nonprofit corporation, and have succession until dissolved 
by an Act of Congress.
    (b) Status.--The Board shall not be an agency or establishment of 
the United States Government, and, except as otherwise provided in this 
Act, shall be subject to, and have all the powers conferred upon a 
nonprofit corporation by, the District of Columbia Nonprofit 
Corporation Act. No member or person employed by, or agent for, the 
Board shall be deemed to be an officer or employee of or agent for the 
Federal Government by reason of such service.
    (c) Duties of the Board.--The Board shall, subject to action by the 
Commission under section 107, and once a determination is made by the 
Commission under subsection (d) of this section--
        (1) register public accounting firms that prepare audit reports 
    for issuers, in accordance with section 102;
        (2) establish or adopt, or both, by rule, auditing, quality 
    control, ethics, independence, and other standards relating to the 
    preparation of audit reports for issuers, in accordance with 
    section 103;
        (3) conduct inspections of registered public accounting firms, 
    in accordance with section 104 and the rules of the Board;
        (4) conduct investigations and disciplinary proceedings 
    concerning, and impose appropriate sanctions where justified upon, 
    registered public accounting firms and associated persons of such 
    firms, in accordance with section 105;
        (5) perform such other duties or functions as the Board (or the 
    Commission, by rule or order) determines are necessary or 
    appropriate to promote high professional standards among, and 
    improve the quality of audit services offered by, registered public 
    accounting firms and associated persons thereof, or otherwise to 
    carry out this Act, in order to protect investors, or to further 
    the public interest;
        (6) enforce compliance with this Act, the rules of the Board, 
    professional standards, and the securities laws relating to the 
    preparation and issuance of audit reports and the obligations and 
    liabilities of accountants with respect thereto, by registered 
    public accounting firms and associated persons thereof; and
        (7) set the budget and manage the operations of the Board and 
    the staff of the Board.
    (d) Commission Determination.--The members of the Board shall take 
such action (including hiring of staff, proposal of rules, and adoption 
of initial and transitional auditing and other professional standards) 
as may be necessary or appropriate to enable the Commission to 
determine, not later than 270 days after the date of enactment of this 
Act, that the Board is so organized and has the capacity to carry out 
the requirements of this title, and to enforce compliance with this 
title by registered public accounting firms and associated persons 
thereof. The Commission shall be responsible, prior to the appointment 
of the Board, for the planning for the establishment and administrative 
transition to the Board's operation.
    (e) Board Membership.--
        (1) Composition.--The Board shall have 5 members, appointed 
    from among prominent individuals of integrity and reputation who 
    have a demonstrated commitment to the interests of investors and 
    the public, and an understanding of the responsibilities for and 
    nature of the financial disclosures required of issuers under the 
    securities laws and the obligations of accountants with respect to 
    the preparation and issuance of audit reports with respect to such 
    disclosures.
        (2) Limitation.--Two members, and only 2 members, of the Board 
    shall be or have been certified public accountants pursuant to the 
    laws of 1 or more States, provided that, if 1 of those 2 members is 
    the chairperson, he or she may not have been a practicing certified 
    public accountant for at least 5 years prior to his or her 
    appointment to the Board.
        (3) Full-time independent service.--Each member of the Board 
    shall serve on a full-time basis, and may not, concurrent with 
    service on the Board, be employed by any other person or engage in 
    any other professional or business activity. No member of the Board 
    may share in any of the profits of, or receive payments from, a 
    public accounting firm (or any other person, as determined by rule 
    of the Commission), other than fixed continuing payments, subject 
    to such conditions as the Commission may impose, under standard 
    arrangements for the retirement of members of public accounting 
    firms.
        (4) Appointment of board members.--
            (A) Initial board.--Not later than 90 days after the date 
        of enactment of this Act, 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 
    107(d)(3), for good cause shown before the expiration of the term 
    of that member.
    (f) Powers of the Board.--In addition to any authority granted to 
the Board otherwise in this Act, the Board shall have the power, 
subject to section 107--
        (1) to sue and be sued, complain and defend, in its corporate 
    name and through its own counsel, with the approval of the 
    Commission, in any Federal, State, or other court;
        (2) to conduct its operations and maintain offices, and to 
    exercise all other rights and powers authorized by this Act, in any 
    State, without regard to any qualification, licensing, or other 
    provision of law in effect in such State (or a political 
    subdivision thereof);
        (3) to lease, purchase, accept gifts or donations of or 
    otherwise acquire, improve, use, sell, exchange, or convey, all of 
    or an interest in any property, wherever situated;
        (4) to appoint such employees, accountants, attorneys, and 
    other agents as may be necessary or appropriate, and to determine 
    their qualifications, define their duties, and fix their salaries 
    or other compensation (at a level that is comparable to private 
    sector self-regulatory, accounting, technical, supervisory, or 
    other staff or management positions);
        (5) to allocate, assess, and collect accounting support fees 
    established pursuant to section 109, for the Board, and other fees 
    and charges imposed under this title; and
        (6) to enter into contracts, execute instruments, incur 
    liabilities, and do any and all other acts and things necessary, 
    appropriate, or incidental to the conduct of its operations and the 
    exercise of its obligations, rights, and powers imposed or granted 
    by this title.
    (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.

SEC. 102. REGISTRATION WITH THE BOARD.

    (a) Mandatory Registration.--Beginning 180 days after the date of 
the determination of the Commission under section 101(d), it shall be 
unlawful for any person that is not a registered public accounting firm 
to prepare or issue, or to participate in the preparation or issuance 
of, any audit report with respect to any issuer.
    (b) Applications for Registration.--
        (1) Form of application.--A public accounting firm shall use 
    such form as the Board may prescribe, by rule, to apply for 
    registration under this section.
        (2) Contents of applications.--Each public accounting firm 
    shall submit, as part of its application for registration, in such 
    detail as the Board shall specify--
            (A) the names of all issuers for which the firm prepared or 
        issued audit reports during the immediately preceding calendar 
        year, and for which the firm expects to prepare or issue audit 
        reports during the current calendar year;
            (B) the annual fees received by the firm from each such 
        issuer for audit services, other accounting services, and non-
        audit services, respectively;
            (C) such other current financial information for the most 
        recently completed fiscal year of the firm as the Board may 
        reasonably request;
            (D) a statement of the quality control policies of the firm 
        for its accounting and auditing practices;
            (E) a list of all accountants associated with the firm who 
        participate in or contribute to the preparation of audit 
        reports, stating the license or certification number of each 
        such person, as well as the State license numbers of the firm 
        itself;
            (F) information relating to criminal, civil, or 
        administrative actions or disciplinary proceedings pending 
        against the firm or any associated person of the firm in 
        connection with any audit report;
            (G) copies of any periodic or annual disclosure filed by an 
        issuer with the Commission during the immediately preceding 
        calendar year which discloses accounting disagreements between 
        such issuer and the firm in connection with an audit report 
        furnished or prepared by the firm for such issuer; and
            (H) such other information as the rules of the Board or the 
        Commission shall specify as necessary or appropriate in the 
        public interest or for the protection of investors.
        (3) Consents.--Each application for registration under this 
    subsection shall include--
            (A) a consent executed by the public accounting firm to 
        cooperation in and compliance with any request for testimony or 
        the production of documents made by the Board in the 
        furtherance of its authority and responsibilities under this 
        title (and an agreement to secure and enforce similar consents 
        from each of the associated persons of the public accounting 
        firm as a condition of their continued employment by or other 
        association with such firm); and
            (B) a statement that such firm understands and agrees that 
        cooperation and compliance, as described in the consent 
        required by subparagraph (A), and the securing and enforcement 
        of such consents from its associated persons, in accordance 
        with the rules of the Board, shall be a condition to the 
        continuing effectiveness of the registration of the firm with 
        the Board.
    (c) Action on Applications.--
        (1) Timing.--The Board shall approve a completed application 
    for registration not later than 45 days after the date of receipt 
    of the application, in accordance with the rules of the Board, 
    unless the Board, prior to such date, issues a written notice of 
    disapproval to, or requests more information from, the prospective 
    registrant.
        (2) Treatment.--A written notice of disapproval of a completed 
    application under paragraph (1) for registration shall be treated 
    as a disciplinary sanction for purposes of sections 105(d) and 
    107(c).
    (d) Periodic Reports.--Each registered public accounting firm shall 
submit an annual report to the Board, and may be required to report 
more frequently, as necessary to update the information contained in 
its application for registration under this section, and to provide to 
the Board such additional information as the Board or the Commission 
may specify, in accordance with subsection (b)(2).
    (e) Public Availability.--Registration applications and annual 
reports required by this subsection, or such portions of such 
applications or reports as may be designated under rules of the Board, 
shall be made available for public inspection, subject to rules of the 
Board or the Commission, and to applicable laws relating to the 
confidentiality of proprietary, personal, or other information 
contained in such applications or reports, provided that, in all 
events, the Board shall protect from public disclosure information 
reasonably identified by the subject accounting firm as proprietary 
information.
    (f) Registration and Annual Fees.--The Board shall assess and 
collect a registration fee and an annual fee from each registered 
public accounting firm, in amounts that are sufficient to recover the 
costs of processing and reviewing applications and annual reports.

SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE STANDARDS AND 
              RULES.

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

                    (I) the findings of the auditor from such testing;
                    (II) an evaluation of whether such internal control 
                structure and procedures--

                        (aa) include maintenance of records that in 
                    reasonable detail accurately and fairly reflect the 
                    transactions and dispositions of the assets of the 
                    issuer;
                        (bb) provide reasonable assurance that 
                    transactions are recorded as necessary to permit 
                    preparation of financial statements in accordance 
                    with generally accepted accounting principles, and 
                    that receipts and expenditures of the issuer are 
                    being made only in accordance with authorizations 
                    of management and directors of the issuer; and

                    (III) a description, at a minimum, of material 
                weaknesses in such internal controls, and of any 
                material noncompliance found on the basis of such 
                testing.

            (B) shall include, in the quality control standards that it 
        adopts with respect to the issuance of audit reports, 
        requirements for every registered public accounting firm 
        relating to--
                (i) monitoring of professional ethics and independence 
            from issuers on behalf of which the firm issues audit 
            reports;
                (ii) consultation within such firm on accounting and 
            auditing questions;
                (iii) supervision of audit work;
                (iv) hiring, professional development, and advancement 
            of personnel;
                (v) the acceptance and continuation of engagements;
                (vi) internal inspection; and
                (vii) such other requirements as the Board may 
            prescribe, subject to subsection (a)(1).
        (3) Authority to adopt other standards.--
            (A) In general.--In carrying out this subsection, the 
        Board--
                (i) may adopt as its rules, subject to the terms of 
            section 107, any portion of any statement of auditing 
            standards or other professional standards that the Board 
            determines satisfy the requirements of paragraph (1), and 
            that were proposed by 1 or more professional groups of 
            accountants that shall be designated or recognized by the 
            Board, by rule, for such purpose, pursuant to this 
            paragraph or 1 or more advisory groups convened pursuant to 
            paragraph (4); and
                (ii) notwithstanding clause (i), shall retain full 
            authority to modify, supplement, revise, or subsequently 
            amend, modify, or repeal, in whole or in part, any portion 
            of any statement described in clause (i).
            (B) Initial and transitional standards.--The Board shall 
        adopt standards described in subparagraph (A)(i) as initial or 
        transitional standards, to the extent the Board determines 
        necessary, prior to a determination of the Commission under 
        section 101(d), and such standards shall be separately approved 
        by the Commission at the time of that determination, without 
        regard to the procedures required by section 107 that otherwise 
        would apply to the approval of rules of the Board.
        (4) Advisory groups.--The Board shall convene, or authorize its 
    staff to convene, such expert advisory groups as may be 
    appropriate, which may include practicing accountants and other 
    experts, as well as representatives of other interested groups, 
    subject to such rules as the Board may prescribe to prevent 
    conflicts of interest, to make recommendations concerning the 
    content (including proposed drafts) of auditing, quality control, 
    ethics, independence, or other standards required to be established 
    under this section.
    (b) Independence Standards and Rules.--The Board shall establish 
such rules as may be necessary or appropriate in the public interest or 
for the protection of investors, to implement, or as authorized under, 
title II of this Act.
    (c) Cooperation With Designated Professional Groups of Accountants 
and Advisory Groups.--
        (1) In general.--The Board shall cooperate on an ongoing basis 
    with professional groups of accountants designated under subsection 
    (a)(3)(A) and advisory groups convened under subsection (a)(4) in 
    the examination of the need for changes in any standards subject to 
    its authority under subsection (a), recommend issues for inclusion 
    on the agendas of such designated professional groups of 
    accountants or advisory groups, and take such other steps as it 
    deems appropriate to increase the effectiveness of the standard 
    setting process.
        (2) Board responses.--The Board shall respond in a timely 
    fashion to requests from designated professional groups of 
    accountants and advisory groups referred to in paragraph (1) for 
    any changes in standards over which the Board has authority.
    (d) Evaluation of Standard Setting Process.--The Board shall 
include in the annual report required by section 101(h) the results of 
its standard setting responsibilities during the period to which the 
report relates, including a discussion of the work of the Board with 
any designated professional groups of accountants and advisory groups 
described in paragraphs (3)(A) and (4) of subsection (a), and its 
pending issues agenda for future standard setting projects.

SEC. 104. INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS.

    (a) In General.--The Board shall conduct a continuing program of 
inspections to assess the degree of compliance of each registered 
public accounting firm and associated persons of that firm with this 
Act, the rules of the Board, the rules of the Commission, or 
professional standards, in connection with its performance of audits, 
issuance of audit reports, and related matters involving issuers.
    (b) Inspection Frequency.--
        (1) In general.--Subject to paragraph (2), inspections required 
    by this section shall be conducted--
            (A) annually with respect to each registered public 
        accounting firm that regularly provides audit reports for more 
        than 100 issuers; and
            (B) not less frequently than once every 3 years with 
        respect to each registered public accounting firm that 
        regularly provides audit reports for 100 or fewer issuers.
        (2) Adjustments to schedules.--The Board may, by rule, adjust 
    the inspection schedules set under paragraph (1) if the Board finds 
    that different inspection schedules are consistent with the 
    purposes of this Act, the public interest, and the protection of 
    investors. The Board may conduct special inspections at the request 
    of the Commission or upon its own motion.
    (c) Procedures.--The Board shall, in each inspection under this 
section, and in accordance with its rules for such inspections--
        (1) identify any act or practice or omission to act by the 
    registered public accounting firm, or by any associated person 
    thereof, revealed by such inspection that may be in violation of 
    this Act, the rules of the Board, the rules of the Commission, the 
    firm's own quality control policies, or professional standards;
        (2) report any such act, practice, or omission, if appropriate, 
    to the Commission and each appropriate State regulatory authority; 
    and
        (3) begin a formal investigation or take disciplinary action, 
    if appropriate, with respect to any such violation, in accordance 
    with this Act and the rules of the Board.
    (d) Conduct of Inspections.--In conducting an inspection of a 
registered public accounting firm under this section, the Board shall--
        (1) inspect and review selected audit and review engagements of 
    the firm (which may include audit engagements that are the subject 
    of ongoing litigation or other controversy between the firm and 1 
    or more third parties), performed at various offices and by various 
    associated persons of the firm, as selected by the Board;
        (2) evaluate the sufficiency of the quality control system of 
    the firm, and the manner of the documentation and communication of 
    that system by the firm; and
        (3) perform such other testing of the audit, supervisory, and 
    quality control procedures of the firm as are necessary or 
    appropriate in light of the purpose of the inspection and the 
    responsibilities of the Board.
    (e) Record Retention.--The rules of the Board may require the 
retention by registered public accounting firms for inspection purposes 
of records whose retention is not otherwise required by section 103 or 
the rules issued thereunder.
    (f) Procedures for Review.--The rules of the Board shall provide a 
procedure for the review of and response to a draft inspection report 
by the registered public accounting firm under inspection. The Board 
shall take such action with respect to such response as it considers 
appropriate (including revising the draft report or continuing or 
supplementing its inspection activities before issuing a final report), 
but the text of any such response, appropriately redacted to protect 
information reasonably identified by the accounting firm as 
confidential, shall be attached to and made part of the inspection 
report.
    (g) Report.--A written report of the findings of the Board for each 
inspection under this section, subject to subsection (h), shall be--
        (1) transmitted, in appropriate detail, to the Commission and 
    each appropriate State regulatory authority, accompanied by any 
    letter or comments by the Board or the inspector, and any letter of 
    response from the registered public accounting firm; and
        (2) made available in appropriate detail to the public (subject 
    to section 105(b)(5)(A), and to the protection of such confidential 
    and proprietary information as the Board may determine to be 
    appropriate, or as may be required by law), except that no portions 
    of the inspection report that deal with criticisms of or potential 
    defects in the quality control systems of the firm under inspection 
    shall be made public if those criticisms or defects are addressed 
    by the firm, to the satisfaction of the Board, not later than 12 
    months after the date of the inspection report.
    (h) Interim Commission Review.--
        (1) Reviewable matters.--A registered public accounting firm 
    may seek review by the Commission, pursuant to such rules as the 
    Commission shall promulgate, if the firm--
            (A) has provided the Board with a response, pursuant to 
        rules issued by the Board under subsection (f), to the 
        substance of particular items in a draft inspection report, and 
        disagrees with the assessments contained in any final report 
        prepared by the Board following such response; or
            (B) disagrees with the determination of the Board that 
        criticisms or defects identified in an inspection report have 
        not been addressed to the satisfaction of the Board within 12 
        months of the date of the inspection report, for purposes of 
        subsection (g)(2).
        (2) Treatment of review.--Any decision of the Commission with 
    respect to a review under paragraph (1) shall not be reviewable 
    under section 25 of the Securities Exchange Act of 1934 (15 U.S.C. 
    78y), or deemed to be ``final agency action'' for purposes of 
    section 704 of title 5, United States Code.
        (3) Timing.--Review under paragraph (1) may be sought during 
    the 30-day period following the date of the event giving rise to 
    the review under subparagraph (A) or (B) of paragraph (1).

SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.

    (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 107(c).
        (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 509 of the Gramm-Leach-Bliley Act (15 
            U.S.C. 6809)), in the case of an investigation that 
            concerns an audit report for an institution that is subject 
            to the jurisdiction of such regulator; and
                (iii) at the direction of the Commission, to--

                    (I) the Attorney General of the United States;
                    (II) the attorney general of 1 or more States; and
                    (III) the appropriate State regulatory authority.

        (5) Use of documents.--
            (A) Confidentiality.--Except as provided in subparagraph 
        (B), all documents and information prepared or received by or 
        specifically for the Board, and deliberations of the Board and 
        its employees and agents, in connection with an inspection 
        under section 104 or with an investigation under this section, 
        shall be confidential and privileged as an evidentiary matter 
        (and shall not be subject to civil discovery or other legal 
        process) in any proceeding in any Federal or State court or 
        administrative agency, and shall be exempt from disclosure, in 
        the hands of an agency or establishment of the Federal 
        Government, under the Freedom of Information Act (5 U.S.C. 
        552a), or otherwise, unless and until presented in connection 
        with a public proceeding or released in accordance with 
        subsection (c).
            (B) Availability to government agencies.--Without the loss 
        of its status as confidential and privileged in the hands of 
        the Board, all information referred to in subparagraph (A) 
        may--
                (i) be made available to the Commission; and
                (ii) in the discretion of the Board, when determined by 
            the Board to be necessary to accomplish the purposes of 
            this Act or to protect investors, be made available to--

                    (I) the Attorney General of the United States;
                    (II) the appropriate Federal functional regulator 
                (as defined in section 509 of the Gramm-Leach-Bliley 
                Act (15 U.S.C. 6809)), other than the Commission, with 
                respect to an audit report for an institution subject 
                to the jurisdiction of such regulator;
                    (III) State attorneys general in connection with 
                any criminal investigation; and
                    (IV) any appropriate State regulatory authority,

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

SEC. 106. FOREIGN PUBLIC ACCOUNTING FIRMS.

    (a) Applicability to Certain Foreign Firms.--
        (1) In general.--Any foreign public accounting firm that 
    prepares or furnishes an audit report with respect to any issuer, 
    shall be subject to this Act and the rules of the Board and the 
    Commission issued under this Act, in the same manner and to the 
    same extent as a public accounting firm that is organized and 
    operates under the laws of the United States or any State, except 
    that registration pursuant to section 102 shall not by itself 
    provide a basis for subjecting such a foreign public accounting 
    firm to the jurisdiction of the Federal or State courts, other than 
    with respect to controversies between such firms and the Board.
        (2) Board authority.--The Board may, by rule, determine that a 
    foreign public accounting firm (or a class of such firms) that does 
    not issue audit reports nonetheless plays such a substantial role 
    in the preparation and furnishing of such reports for particular 
    issuers, that it is necessary or appropriate, in light of the 
    purposes of this Act and in the public interest or for the 
    protection of investors, that such firm (or class of firms) should 
    be treated as a public accounting firm (or firms) for purposes of 
    registration under, and oversight by the Board in accordance with, 
    this title.
    (b) Production of Audit Workpapers.--
        (1) Consent by foreign firms.--If a foreign public accounting 
    firm issues an opinion or otherwise performs material services upon 
    which a registered public accounting firm relies in issuing all or 
    part of any audit report or any opinion contained in an audit 
    report, that foreign public accounting firm shall be deemed to have 
    consented--
            (A) to produce its audit workpapers for the Board or the 
        Commission in connection with any investigation by either body 
        with respect to that audit report; and
            (B) to be subject to the jurisdiction of the courts of the 
        United States for purposes of enforcement of any request for 
        production of such workpapers.
        (2) Consent by domestic firms.--A registered public accounting 
    firm that relies upon the opinion of a foreign public accounting 
    firm, as described in paragraph (1), shall be deemed--
            (A) to have consented to supplying the audit workpapers of 
        that foreign public accounting firm in response to a request 
        for production by the Board or the Commission; and
            (B) to have secured the agreement of that foreign public 
        accounting firm to such production, as a condition of its 
        reliance on the opinion of that foreign public accounting firm.
    (c) Exemption Authority.--The Commission, and the Board, subject to 
the approval of the Commission, may, by rule, regulation, or order, and 
as the Commission (or Board) determines necessary or appropriate in the 
public interest or for the protection of investors, either 
unconditionally or upon specified terms and conditions exempt any 
foreign public accounting firm, or any class of such firms, from any 
provision of this Act or the rules of the Board or the Commission 
issued under this Act.
    (d) Definition.--In this section, the term ``foreign public 
accounting firm'' means a public accounting firm that is organized and 
operates under the laws of a foreign government or political 
subdivision thereof.

SEC. 107. COMMISSION OVERSIGHT OF THE BOARD.

    (a) General Oversight Responsibility.--The Commission shall have 
oversight and enforcement authority over the Board, as provided in this 
Act. The provisions of section 17(a)(1) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78q(a)(1)), and of section 17(b)(1) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78q(b)(1)) shall apply to 
the Board as fully as if the Board were a ``registered securities 
association'' for purposes of those sections 17(a)(1) and 17(b)(1).
    (b) Rules of the Board.--
        (1) Definition.--In this section, the term ``proposed rule'' 
    means any proposed rule of the Board, and any modification of any 
    such rule.
        (2) Prior approval required.--No rule of the Board shall become 
    effective without prior approval of the Commission in accordance 
    with this section, other than as provided in section 103(a)(3)(B) 
    with respect to initial or transitional standards.
        (3) Approval criteria.--The Commission shall approve a proposed 
    rule, if it finds that the rule is consistent with the requirements 
    of this Act and the securities laws, or is necessary or appropriate 
    in the public interest or for the protection of investors.
        (4) Proposed rule procedures.--The provisions of paragraphs (1) 
    through (3) of section 19(b) of the Securities Exchange Act of 1934 
    (15 U.S.C. 78s(b)) shall govern the proposed rules of the Board, as 
    fully as if the Board were a ``registered securities association'' 
    for purposes of that section 19(b), except that, for purposes of 
    this paragraph--
            (A) the phrase ``consistent with the requirements of this 
        title and the rules and regulations thereunder applicable to 
        such organization'' in section 19(b)(2) of that Act shall be 
        deemed to read ``consistent with the requirements of title I of 
        the Sarbanes-Oxley Act of 2002, and the rules and regulations 
        issued thereunder applicable to such organization, or as 
        necessary or appropriate in the public interest or for the 
        protection of investors''; and
            (B) the phrase ``otherwise in furtherance of the purposes 
        of this title'' in section 19(b)(3)(C) of that Act shall be 
        deemed to read ``otherwise in furtherance of the purposes of 
        title I of the Sarbanes-Oxley Act of 2002''.
        (5) Commission authority to amend rules of the board.--The 
    provisions of section 19(c) of the Securities Exchange Act of 1934 
    (15 U.S.C. 78s(c)) shall govern the abrogation, deletion, or 
    addition to portions of the rules of the Board by the Commission as 
    fully as if the Board were a ``registered securities association'' 
    for purposes of that section 19(c), except that the phrase ``to 
    conform its rules to the requirements of this title and the rules 
    and regulations thereunder applicable to such organization, or 
    otherwise in furtherance of the purposes of this title'' in section 
    19(c) of that Act shall, for purposes of this paragraph, be deemed 
    to read ``to assure the fair administration of the Public Company 
    Accounting Oversight Board, conform the rules promulgated by that 
    Board to the requirements of title I of the Sarbanes-Oxley Act of 
    2002, or otherwise further the purposes of that Act, the securities 
    laws, and the rules and regulations thereunder applicable to that 
    Board''.
    (c) Commission Review of Disciplinary Action Taken by the Board.--
        (1) Notice of sanction.--The Board shall promptly file notice 
    with the Commission of any final sanction on any registered public 
    accounting firm or on any associated person thereof, in such form 
    and containing such information as the Commission, by rule, may 
    prescribe.
        (2) Review of sanctions.--The provisions of sections 19(d)(2) 
    and 19(e)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78s 
    (d)(2) and (e)(1)) shall govern the review by the Commission of 
    final disciplinary sanctions imposed by the Board (including 
    sanctions imposed under section 105(b)(3) of this Act for 
    noncooperation in an investigation of the Board), as fully as if 
    the Board were a self-regulatory organization and the Commission 
    were the appropriate regulatory agency for such organization for 
    purposes of those sections 19(d)(2) and 19(e)(1), except that, for 
    purposes of this paragraph--
            (A) section 105(e) of this Act (rather than that section 
        19(d)(2)) shall govern the extent to which application for, or 
        institution by the Commission on its own motion of, review of 
        any disciplinary action of the Board operates as a stay of such 
        action;
            (B) references in that section 19(e)(1) to ``members'' of 
        such an organization shall be deemed to be references to 
        registered public accounting firms;
            (C) the phrase ``consistent with the purposes of this 
        title'' in that section 19(e)(1) shall be deemed to read 
        ``consistent with the purposes of this title and title I of the 
        Sarbanes-Oxley Act of 2002'';
            (D) references to rules of the Municipal Securities 
        Rulemaking Board in that section 19(e)(1) shall not apply; and
            (E) the reference to section 19(e)(2) of the Securities 
        Exchange Act of 1934 shall refer instead to section 107(c)(3) 
        of this Act.
        (3) Commission modification authority.--The Commission may 
    enhance, modify, cancel, reduce, or require the remission of a 
    sanction imposed by the Board upon a registered public accounting 
    firm or associated person thereof, if the Commission, having due 
    regard for the public interest and the protection of investors, 
    finds, after a proceeding in accordance with this subsection, that 
    the sanction--
            (A) is not necessary or appropriate in furtherance of this 
        Act or the securities laws; or
            (B) is excessive, oppressive, inadequate, or otherwise not 
        appropriate to the finding or the basis on which the sanction 
        was imposed.
    (d) Censure of the Board; Other Sanctions.--
        (1) Rescission of board authority.--The Commission, by rule, 
    consistent with the public interest, the protection of investors, 
    and the other purposes of this Act and the securities laws, may 
    relieve the Board of any responsibility to enforce compliance with 
    any provision of this Act, the securities laws, the rules of the 
    Board, or professional standards.
        (2) Censure of the board; limitations.--The Commission may, by 
    order, as it determines necessary or appropriate in the public 
    interest, for the protection of investors, or otherwise in 
    furtherance of the purposes of this Act or the securities laws, 
    censure or impose limitations upon the activities, functions, and 
    operations of the Board, if the Commission finds, on the record, 
    after notice and opportunity for a hearing, that the Board--
            (A) has violated or is unable to comply with any provision 
        of this Act, the rules of the Board, or the securities laws; or
            (B) without reasonable justification or excuse, has failed 
        to enforce compliance with any such provision or rule, or any 
        professional standard by a registered public accounting firm or 
        an associated person thereof.
        (3) Censure of board members; removal from office.--The 
    Commission may, as necessary or appropriate in the public interest, 
    for the protection of investors, or otherwise in furtherance of the 
    purposes of this Act or the securities laws, remove from office or 
    censure any member of the Board, if the Commission finds, on the 
    record, after notice and opportunity for a hearing, that such 
    member--
            (A) has willfully violated any provision of this Act, the 
        rules of the Board, or the securities laws;
            (B) has willfully abused the authority of that member; or
            (C) without reasonable justification or excuse, has failed 
        to enforce compliance with any such provision or rule, or any 
        professional standard by any registered public accounting firm 
        or any associated person thereof.

SEC. 108. ACCOUNTING STANDARDS.

    (a) Amendment to Securities Act of 1933.--Section 19 of the 
Securities Act of 1933 (15 U.S.C. 77s) is amended--
        (1) by redesignating subsections (b) and (c) as subsections (c) 
    and (d), respectively; and
        (2) by inserting after subsection (a) the following:
    ``(b) Recognition of Accounting Standards.--
        ``(1) In general.--In carrying out its authority under 
    subsection (a) and under section 13(b) of the Securities Exchange 
    Act of 1934, the Commission may recognize, as `generally accepted' 
    for purposes of the securities laws, any accounting principles 
    established by a standard setting body--
            ``(A) that--
                ``(i) is organized as a private entity;
                ``(ii) has, for administrative and operational 
            purposes, a board of trustees (or equivalent body) serving 
            in the public interest, the majority of whom are not, 
            concurrent with their service on such board, and have not 
            been during the 2-year period preceding such service, 
            associated persons of any registered public accounting 
            firm;
                ``(iii) is funded as provided in section 109 of the 
            Sarbanes-Oxley Act of 2002;
                ``(iv) has adopted procedures to ensure prompt 
            consideration, by majority vote of its members, of changes 
            to accounting principles necessary to reflect emerging 
            accounting issues and changing business practices; and
                ``(v) considers, in adopting accounting principles, the 
            need to keep standards current in order to reflect changes 
            in the business environment, the extent to which 
            international convergence on high quality accounting 
            standards is necessary or appropriate in the public 
            interest and for the protection of investors; and
            ``(B) that the Commission determines has the capacity to 
        assist the Commission in fulfilling the requirements of 
        subsection (a) and section 13(b) of the Securities Exchange Act 
        of 1934, because, at a minimum, the standard setting body is 
        capable of improving the accuracy and effectiveness of 
        financial reporting and the protection of investors under the 
        securities laws.
        ``(2) Annual report.--A standard setting body described in 
    paragraph (1) shall submit an annual report to the Commission and 
    the public, containing audited financial statements of that 
    standard setting body.''.
    (b) Commission Authority.--The Commission shall promulgate such 
rules and regulations to carry out section 19(b) of the Securities Act 
of 1933, as added by this section, as it deems necessary or appropriate 
in the public interest or for the protection of investors.
    (c) No Effect on Commission Powers.--Nothing in this Act, including 
this section and the amendment made by this section, shall be construed 
to impair or limit the authority of the Commission to establish 
accounting principles or standards for purposes of enforcement of the 
securities laws.
    (d) Study and Report on Adopting Principles-Based Accounting.--
        (1) Study.--
            (A) In general.--The Commission shall conduct a study on 
        the adoption by the United States financial reporting system of 
        a principles-based accounting system.
            (B) Study topics.--The study required by subparagraph (A) 
        shall include an examination of--
                (i) the extent to which principles-based accounting and 
            financial reporting exists in the United States;
                (ii) the length of time required for change from a 
            rules-based to a principles-based financial reporting 
            system;
                (iii) the feasibility of and proposed methods by which 
            a principles-based system may be implemented; and
                (iv) a thorough economic analysis of the implementation 
            of a principles-based system.
        (2) Report.--Not later than 1 year after the date of enactment 
    of this Act, the Commission shall submit a report on the results of 
    the study required by paragraph (1) to the Committee on Banking, 
    Housing, and Urban Affairs of the Senate and the Committee on 
    Financial Services of the House of Representatives.

SEC. 109. FUNDING.

    (a) In General.--The Board, and the standard setting body 
designated pursuant to section 19(b) of the Securities Act of 1933, as 
amended by section 108, shall be funded as provided in this section.
    (b) Annual Budgets.--The Board and the standard setting body 
referred to in subsection (a) shall each establish a budget for each 
fiscal year, which shall be reviewed and approved according to their 
respective internal procedures not less than 1 month prior to the 
commencement of the fiscal year to which the budget pertains (or at the 
beginning of the Board's first fiscal year, which may be a short fiscal 
year). The budget of the Board shall be subject to approval by the 
Commission. The budget for the first fiscal year of the Board shall be 
prepared and approved promptly following the appointment of the initial 
five Board members, to permit action by the Board of the organizational 
tasks contemplated by section 101(d).
    (c) Sources and Uses of Funds.--
        (1) Recoverable budget expenses.--The budget of the Board 
    (reduced by any registration or annual fees received under section 
    102(e) for the year preceding the year for which the budget is 
    being computed), and all of the budget of the standard setting body 
    referred to in subsection (a), for each fiscal year of each of 
    those 2 entities, shall be payable from annual accounting support 
    fees, in accordance with subsections (d) and (e). Accounting 
    support fees and other receipts of the Board and of such standard-
    setting body shall not be considered public monies of the United 
    States.
        (2) Funds generated from the collection of monetary 
    penalties.--Subject to the availability in advance in an 
    appropriations Act, and notwithstanding subsection (i), all funds 
    collected by the Board as a result of the assessment of monetary 
    penalties shall be used to fund a merit scholarship program for 
    undergraduate and graduate students enrolled in accredited 
    accounting degree programs, which program is to be administered by 
    the Board or by an entity or agent identified by the Board.
    (d) Annual Accounting Support Fee for the Board.--
        (1) Establishment of fee.--The Board shall establish, with the 
    approval of the Commission, a reasonable annual accounting support 
    fee (or a formula for the computation thereof), as may be necessary 
    or appropriate to establish and maintain the Board. Such fee may 
    also cover costs incurred in the Board's first fiscal year (which 
    may be a short fiscal year), or may be levied separately with 
    respect to such short fiscal year.
        (2) Assessments.--The rules of the Board under paragraph (1) 
    shall provide for the equitable allocation, assessment, and 
    collection by the Board (or an agent appointed by the Board) of the 
    fee established under paragraph (1), among issuers, in accordance 
    with subsection (g), allowing for differentiation among classes of 
    issuers, as appropriate.
    (e) Annual Accounting Support Fee for Standard Setting Body.--The 
annual accounting support fee for the standard setting body referred to 
in subsection (a)--
        (1) shall be allocated in accordance with subsection (g), and 
    assessed and collected against each issuer, on behalf of the 
    standard setting body, by 1 or more appropriate designated 
    collection agents, as may be necessary or appropriate to pay for 
    the budget and provide for the expenses of that standard setting 
    body, and to provide for an independent, stable source of funding 
    for such body, subject to review by the Commission; and
        (2) may differentiate among different classes of issuers.
    (f) Limitation on Fee.--The amount of fees collected under this 
section for a fiscal year on behalf of the Board or the standards 
setting body, as the case may be, shall not exceed the recoverable 
budget expenses of the Board or body, respectively (which may include 
operating, capital, and accrued items), referred to in subsection 
(c)(1).
    (g) Allocation of Accounting Support Fees Among Issuers.--Any 
amount due from issuers (or a particular class of issuers) under this 
section to fund the budget of the Board or the standard setting body 
referred to in subsection (a) shall be allocated among and payable by 
each issuer (or each issuer in a particular class, as applicable) in an 
amount equal to the total of such amount, multiplied by a fraction--
        (1) the numerator of which is the average monthly equity market 
    capitalization of the issuer for the 12-month period immediately 
    preceding the beginning of the fiscal year to which such budget 
    relates; and
        (2) the denominator of which is the average monthly equity 
    market capitalization of all such issuers for such 12-month period.
    (h) Conforming Amendments.--Section 13(b)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m(b)(2)) is amended--
        (1) in subparagraph (A), by striking ``and'' at the end; and
        (2) in subparagraph (B), by striking the period at the end and 
    inserting the following: ``; and
        ``(C) notwithstanding any other provision of law, pay the 
    allocable share of such issuer of a reasonable annual accounting 
    support fee or fees, determined in accordance with section 109 of 
    the Sarbanes-Oxley Act of 2002.''.
    (i) Rule of Construction.--Nothing in this section shall be 
construed to render either the Board, the standard setting body 
referred to in subsection (a), or both, subject to procedures in 
Congress to authorize or appropriate public funds, or to prevent such 
organization from utilizing additional sources of revenue for its 
activities, such as earnings from publication sales, provided that each 
additional source of revenue shall not jeopardize, in the judgment of 
the Commission, the actual and perceived independence of such 
organization.
    (j) Start-Up Expenses of the Board.--From the unexpended balances 
of the appropriations to the Commission for fiscal year 2003, the 
Secretary of the Treasury is authorized to advance to the Board not to 
exceed the amount necessary to cover the expenses of the Board during 
its first fiscal year (which may be a short fiscal year).

                     TITLE II--AUDITOR INDEPENDENCE

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

    (a) Prohibited Activities.--Section 10A of the Securities Exchange 
Act of 1934 (15 U.S.C. 78j-1) is amended by adding at the end the 
following:
    ``(g) Prohibited Activities.--Except as provided in subsection (h), 
it shall be unlawful for a registered public accounting firm (and any 
associated person of that firm, to the extent determined appropriate by 
the Commission) that performs for any issuer any audit required by this 
title or the rules of the Commission under this title or, beginning 180 
days after the date of commencement of the operations of the Public 
Company Accounting Oversight Board established under section 101 of the 
Sarbanes-Oxley Act of 2002 (in this section referred to as the 
`Board'), the rules of the Board, to provide to that issuer, 
contemporaneously with the audit, any non-audit service, including--
        ``(1) bookkeeping or other services related to the accounting 
    records or financial statements of the audit client;
        ``(2) financial information systems design and implementation;
        ``(3) appraisal or valuation services, fairness opinions, or 
    contribution-in-kind reports;
        ``(4) actuarial services;
        ``(5) internal audit outsourcing services;
        ``(6) management functions or human resources;
        ``(7) broker or dealer, investment adviser, or investment 
    banking services;
        ``(8) legal services and expert services unrelated to the 
    audit; and
        ``(9) any other service that the Board determines, by 
    regulation, is impermissible.
    ``(h) Preapproval Required for Non-Audit Services.--A registered 
public accounting firm may engage in any non-audit service, including 
tax services, that is not described in any of paragraphs (1) through 
(9) of subsection (g) for an audit client, only if the activity is 
approved in advance by the audit committee of the issuer, in accordance 
with subsection (i).''.
    (b) Exemption Authority.--The Board may, on a case by case basis, 
exempt any person, issuer, public accounting firm, or transaction from 
the prohibition on the provision of services under section 10A(g) of 
the Securities Exchange Act of 1934 (as added by this section), to the 
extent that such exemption is necessary or appropriate in the public 
interest and is consistent with the protection of investors, and 
subject to review by the Commission in the same manner as for rules of 
the Board under section 107.

SEC. 202. PREAPPROVAL REQUIREMENTS.

    Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78j-
1), as amended by this Act, is amended by adding at the end the 
following:
    ``(i) Preapproval Requirements.--
        ``(1) In general.--
            ``(A) Audit committee action.--All auditing services (which 
        may entail providing comfort letters in connection with 
        securities underwritings or statutory audits required for 
        insurance companies for purposes of State law) and non-audit 
        services, other than as provided in subparagraph (B), provided 
        to an issuer by the auditor of the issuer shall be preapproved 
        by the audit committee of the issuer.
            ``(B) De minimus exception.--The preapproval requirement 
        under subparagraph (A) is waived with respect to the provision 
        of non-audit services for an issuer, if--
                ``(i) the aggregate amount of all such non-audit 
            services provided to the issuer constitutes not more than 5 
            percent of the total amount of revenues paid by the issuer 
            to its auditor during the fiscal year in which the nonaudit 
            services are provided;
                ``(ii) such services were not recognized by the issuer 
            at the time of the engagement to be non-audit services; and
                ``(iii) such services are promptly brought to the 
            attention of the audit committee of the issuer and approved 
            prior to the completion of the audit by the audit committee 
            or by 1 or more members of the audit committee who are 
            members of the board of directors to whom authority to 
            grant such approvals has been delegated by the audit 
            committee.
        ``(2) Disclosure to investors.--Approval by an audit committee 
    of an issuer under this subsection of a non-audit service to be 
    performed by the auditor of the issuer shall be disclosed to 
    investors in periodic reports required by section 13(a).
        ``(3) Delegation authority.--The audit committee of an issuer 
    may delegate to 1 or more designated members of the audit committee 
    who are independent directors of the board of directors, the 
    authority to grant preapprovals required by this subsection. The 
    decisions of any member to whom authority is delegated under this 
    paragraph to preapprove an activity under this subsection shall be 
    presented to the full audit committee at each of its scheduled 
    meetings.
        ``(4) Approval of audit services for other purposes.--In 
    carrying out its duties under subsection (m)(2), if the audit 
    committee of an issuer approves an audit service within the scope 
    of the engagement of the auditor, such audit service shall be 
    deemed to have been preapproved for purposes of this subsection.''.

SEC. 203. AUDIT PARTNER ROTATION.

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

SEC. 204. AUDITOR REPORTS TO AUDIT COMMITTEES.

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

SEC. 205. CONFORMING AMENDMENTS.

    (a) Definitions.--Section 3(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following:
        ``(58) Audit committee.--The term `audit committee' means--
            ``(A) a committee (or equivalent body) established by and 
        amongst the board of directors of an issuer for the purpose of 
        overseeing the accounting and financial reporting processes of 
        the issuer and audits of the financial statements of the 
        issuer; and
            ``(B) if no such committee exists with respect to an 
        issuer, the entire board of directors of the issuer.
        ``(59) Registered public accounting firm.--The term `registered 
    public accounting firm' has the same meaning as in section 2 of the 
    Sarbanes-Oxley Act of 2002.''.
    (b) Auditor Requirements.--Section 10A of the Securities Exchange 
Act of 1934 (15 U.S.C. 78j-1) is amended--
        (1) by striking ``an independent public accountant'' each place 
    that term appears and inserting ``a registered public accounting 
    firm'';
        (2) by striking ``the independent public accountant'' each 
    place that term appears and inserting ``the registered public 
    accounting firm'';
        (3) in subsection (c), by striking ``No independent public 
    accountant'' and inserting ``No registered public accounting 
    firm''; and
        (4) in subsection (b)--
            (A) by striking ``the accountant'' each place that term 
        appears and inserting ``the firm'';
            (B) by striking ``such accountant'' each place that term 
        appears and inserting ``such firm''; and
            (C) in paragraph (4), by striking ``the accountant's 
        report'' and inserting ``the report of the firm''.
    (c) Other References.--The Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.) is amended--
        (1) in section 12(b)(1) (15 U.S.C. 78l(b)(1)), by striking 
    ``independent public accountants'' each place that term appears and 
    inserting ``a registered public accounting firm''; and
        (2) in subsections (e) and (i) of section 17 (15 U.S.C. 78q), 
    by striking ``an independent public accountant'' each place that 
    term appears and inserting ``a registered public accounting firm''.
    (d) Conforming Amendment.--Section 10A(f) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78k(f)) is amended--
        (1) by striking ``Definition'' and inserting ``Definitions''; 
    and
        (2) by adding at the end the following: ``As used in this 
    section, the term `issuer' means an issuer (as defined in section 
    3), the securities of which are registered under section 12, or 
    that is required to file reports pursuant to section 15(d), or that 
    files or has filed a registration statement that has not yet become 
    effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), 
    and that it has not withdrawn.''.

SEC. 206. CONFLICTS OF INTEREST.

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

SEC. 207. STUDY OF MANDATORY ROTATION OF REGISTERED PUBLIC ACCOUNTING 
              FIRMS.

    (a) Study and Review Required.--The Comptroller General of the 
United States shall conduct a study and review of the potential effects 
of requiring the mandatory rotation of registered public accounting 
firms.
    (b) Report Required.--Not later than 1 year after the date of 
enactment of this Act, the Comptroller General shall submit a report to 
the Committee on Banking, Housing, and Urban Affairs of the Senate and 
the Committee on Financial Services of the House of Representatives on 
the results of the study and review required by this section.
    (c) Definition.--For purposes of this section, the term ``mandatory 
rotation'' refers to the imposition of a limit on the period of years 
in which a particular registered public accounting firm may be the 
auditor of record for a particular issuer.

SEC. 208. COMMISSION AUTHORITY.

    (a) Commission Regulations.--Not later than 180 days after the date 
of enactment of this Act, the Commission shall issue final regulations 
to carry out each of subsections (g) through (l) of section 10A of the 
Securities Exchange Act of 1934, as added by this title.
    (b) Auditor Independence.--It shall be unlawful for any registered 
public accounting firm (or an associated person thereof, as applicable) 
to prepare or issue any audit report with respect to any issuer, if the 
firm or associated person engages in any activity with respect to that 
issuer prohibited by any of subsections (g) through (l) of section 10A 
of the Securities Exchange Act of 1934, as added by this title, or any 
rule or regulation of the Commission or of the Board issued thereunder.

SEC. 209. CONSIDERATIONS BY APPROPRIATE STATE REGULATORY AUTHORITIES.

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

                  TITLE III--CORPORATE RESPONSIBILITY

SEC. 301. PUBLIC COMPANY AUDIT COMMITTEES.

    Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78f) 
is amended by adding at the end the following:
    ``(m) Standards Relating to Audit Committees.--
        ``(1) Commission rules.--
            ``(A) In general.--Effective not later than 270 days after 
        the date of enactment of this subsection, the Commission shall, 
        by rule, direct the national securities exchanges and national 
        securities associations to prohibit the listing of any security 
        of an issuer that is not in compliance with the requirements of 
        any portion of paragraphs (2) through (6).
            ``(B) Opportunity to cure defects.--The rules of the 
        Commission under subparagraph (A) shall provide for appropriate 
        procedures for an issuer to have an opportunity to cure any 
        defects that would be the basis for a prohibition under 
        subparagraph (A), before the imposition of such prohibition.
        ``(2) Responsibilities relating to registered public accounting 
    firms.--The audit committee of each issuer, in its capacity as a 
    committee of the board of directors, shall be directly responsible 
    for the appointment, compensation, and oversight of the work of any 
    registered public accounting firm employed by that issuer 
    (including resolution of disagreements between management and the 
    auditor regarding financial reporting) for the purpose of preparing 
    or issuing an audit report or related work, and each such 
    registered public accounting firm shall report directly to the 
    audit committee.
        ``(3) Independence.--
            ``(A) In general.--Each member of the audit committee of 
        the issuer shall be a member of the board of directors of the 
        issuer, and shall otherwise be independent.
            ``(B) Criteria.--In order to be considered to be 
        independent for purposes of this paragraph, a member of an 
        audit committee of an issuer may not, other than in his or her 
        capacity as a member of the audit committee, the board of 
        directors, or any other board committee--
                ``(i) accept any consulting, advisory, or other 
            compensatory fee from the issuer; or
                ``(ii) be an affiliated person of the issuer or any 
            subsidiary thereof.
            ``(C) Exemption authority.--The Commission may exempt from 
        the requirements of subparagraph (B) a particular relationship 
        with respect to audit committee members, as the Commission 
        determines appropriate in light of the circumstances.
        ``(4) Complaints.--Each audit committee shall establish 
    procedures for--
            ``(A) the receipt, retention, and treatment of complaints 
        received by the issuer regarding accounting, internal 
        accounting controls, or auditing matters; and
            ``(B) the confidential, anonymous submission by employees 
        of the issuer of concerns regarding questionable accounting or 
        auditing matters.
        ``(5) Authority to engage advisers.--Each audit committee shall 
    have the authority to engage independent counsel and other 
    advisers, as it determines necessary to carry out its duties.
        ``(6) Funding.--Each issuer shall provide for appropriate 
    funding, as determined by the audit committee, in its capacity as a 
    committee of the board of directors, for payment of compensation--
            ``(A) to the registered public accounting firm employed by 
        the issuer for the purpose of rendering or issuing an audit 
        report; and
            ``(B) to any advisers employed by the audit committee under 
        paragraph (5).''.

SEC. 302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

    (a) Regulations Required.--The Commission shall, by rule, require, 
for each company filing periodic reports under section 13(a) or 15(d) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)), that 
the principal executive officer or officers and the principal financial 
officer or officers, or persons performing similar functions, certify 
in each annual or quarterly report filed or submitted under either such 
section of such Act that--
        (1) the signing officer has reviewed the report;
        (2) based on the officer's knowledge, the report does not 
    contain any untrue statement of a material fact or omit to state a 
    material fact necessary in order to make the statements made, in 
    light of the circumstances under which such statements were made, 
    not misleading;
        (3) based on such officer's knowledge, the financial 
    statements, and other financial information included in the report, 
    fairly present in all material respects the financial condition and 
    results of operations of the issuer as of, and for, the periods 
    presented in the report;
        (4) the signing officers--
            (A) are responsible for establishing and maintaining 
        internal controls;
            (B) have designed such internal controls to ensure that 
        material information relating to the issuer and its 
        consolidated subsidiaries is made known to such officers by 
        others within those entities, particularly during the period in 
        which the periodic reports are being prepared;
            (C) have evaluated the effectiveness of the issuer's 
        internal controls as of a date within 90 days prior to the 
        report; and
            (D) have presented in the report their conclusions about 
        the effectiveness of their internal controls based on their 
        evaluation as of that date;
        (5) the signing officers have disclosed to the issuer's 
    auditors and the audit committee of the board of directors (or 
    persons fulfilling the equivalent function)--
            (A) all significant deficiencies in the design or operation 
        of internal controls which could adversely affect the issuer's 
        ability to record, process, summarize, and report financial 
        data and have identified for the issuer's auditors any material 
        weaknesses in internal controls; and
            (B) any fraud, whether or not material, that involves 
        management or other employees who have a significant role in 
        the issuer's internal controls; and
        (6) the signing officers have indicated in the report whether 
    or not there were significant changes in internal controls or in 
    other factors that could significantly affect internal controls 
    subsequent to the date of their evaluation, including any 
    corrective actions with regard to significant deficiencies and 
    material weaknesses.
    (b) Foreign Reincorporations Have No Effect.--Nothing in this 
section 302 shall be interpreted or applied in any way to allow any 
issuer to lessen the legal force of the statement required under this 
section 302, by an issuer having reincorporated or having engaged in 
any other transaction that resulted in the transfer of the corporate 
domicile or offices of the issuer from inside the United States to 
outside of the United States.
    (c) Deadline.--The rules required by subsection (a) shall be 
effective not later than 30 days after the date of enactment of this 
Act.

SEC. 303. IMPROPER INFLUENCE ON CONDUCT OF AUDITS.

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

SEC. 304. FORFEITURE OF CERTAIN BONUSES AND PROFITS.

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

SEC. 305. OFFICER AND DIRECTOR BARS AND PENALTIES.

    (a) Unfitness Standard.--
        (1) Securities exchange act of 1934.--Section 21(d)(2) of the 
    Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(2)) is amended by 
    striking ``substantial unfitness'' and inserting ``unfitness''.
        (2) Securities act of 1933.--Section 20(e) of the Securities 
    Act of 1933 (15 U.S.C. 77t(e)) is amended by striking ``substantial 
    unfitness'' and inserting ``unfitness''.
    (b) Equitable Relief.--Section 21(d) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78u(d)) is amended by adding at the end the 
following:
    ``(5) Equitable Relief.--In any action or proceeding brought or 
instituted by the Commission under any provision of the securities 
laws, the Commission may seek, and any Federal court may grant, any 
equitable relief that may be appropriate or necessary for the benefit 
of investors.''.

SEC. 306. INSIDER TRADES DURING PENSION FUND BLACKOUT PERIODS.

    (a) Prohibition of Insider Trading During Pension Fund Blackout 
Periods.--
        (1) In general.--Except to the extent otherwise provided by 
    rule of the Commission pursuant to paragraph (3), it shall be 
    unlawful for any director or executive officer of an issuer of any 
    equity security (other than an exempted security), directly or 
    indirectly, to purchase, sell, or otherwise acquire or transfer any 
    equity security of the issuer (other than an exempted security) 
    during any blackout period with respect to such equity security if 
    such director or officer acquires such equity security in 
    connection with his or her service or employment as a director or 
    executive officer.
        (2) Remedy.--
            (A) In general.--Any profit realized by a director or 
        executive officer referred to in paragraph (1) from any 
        purchase, sale, or other acquisition or transfer in violation 
        of this subsection shall inure to and be recoverable by the 
        issuer, irrespective of any intention on the part of such 
        director or executive officer in entering into the transaction.
            (B) Actions to recover profits.--An action to recover 
        profits in accordance with this subsection may be instituted at 
        law or in equity in any court of competent jurisdiction by the 
        issuer, or by the owner of any security of the issuer in the 
        name and in behalf of the issuer if the issuer fails or refuses 
        to bring such action within 60 days after the date of request, 
        or fails diligently to prosecute the action thereafter, except 
        that no such suit shall be brought more than 2 years after the 
        date on which such profit was realized.
        (3) Rulemaking Authorized.--The Commission shall, in 
    consultation with the Secretary of Labor, issue rules to clarify 
    the application of this subsection and to prevent evasion thereof. 
    Such rules shall provide for the application of the requirements of 
    paragraph (1) with respect to entities treated as a single employer 
    with respect to an issuer under section 414(b), (c), (m), or (o) of 
    the Internal Revenue Code of 1986 to the extent necessary to 
    clarify the application of such requirements and to prevent evasion 
    thereof. Such rules may also provide for appropriate exceptions 
    from the requirements of this subsection, including exceptions for 
    purchases pursuant to an automatic dividend reinvestment program or 
    purchases or sales made pursuant to an advance election.
        (4) Blackout period.--For purposes of this subsection, the term 
    ``blackout period'', with respect to the equity securities of any 
    issuer--
            (A) means any period of more than 3 consecutive business 
        days during which the ability of not fewer than 50 percent of 
        the participants or beneficiaries under all individual account 
        plans maintained by the issuer to purchase, sell, or otherwise 
        acquire or transfer an interest in any equity of such issuer 
        held in such an individual account plan is temporarily 
        suspended by the issuer or by a fiduciary of the plan; and
            (B) does not include, under regulations which shall be 
        prescribed by the Commission--
                (i) a regularly scheduled period in which the 
            participants and beneficiaries may not purchase, sell, or 
            otherwise acquire or transfer an interest in any equity of 
            such issuer, if such period is--

                    (I) incorporated into the individual account plan; 
                and
                    (II) timely disclosed to employees before becoming 
                participants under the individual account plan or as a 
                subsequent amendment to the plan; or

                (ii) any suspension described in subparagraph (A) that 
            is imposed solely in connection with persons becoming 
            participants or beneficiaries, or ceasing to be 
            participants or beneficiaries, in an individual account 
            plan by reason of a corporate merger, acquisition, 
            divestiture, or similar transaction involving the plan or 
            plan sponsor.
        (5) Individual account plan.--For purposes of this subsection, 
    the term ``individual account plan'' has the meaning provided in 
    section 3(34) of the Employee Retirement Income Security Act of 
    1974 (29 U.S.C. 1002(34), except that such term shall not include a 
    one-participant retirement plan (within the meaning of section 
    101(i)(8)(B) of such Act (29 U.S.C. 1021(i)(8)(B))).
        (6) Notice to directors, executive officers, and the 
    commission.--In any case in which a director or executive officer 
    is subject to the requirements of this subsection in connection 
    with a blackout period (as defined in paragraph (4)) with respect 
    to any equity securities, the issuer of such equity securities 
    shall timely notify such director or officer and the Securities and 
    Exchange Commission of such blackout period.
    (b) Notice Requirements to Participants and Beneficiaries under 
ERISA.--
        (1) In general.--Section 101 of the Employee Retirement Income 
    Security Act of 1974 (29 U.S.C. 1021) is amended by redesignating 
    the second subsection (h) as subsection (j), and by inserting after 
    the first subsection (h) the following new subsection:
    ``(i) Notice of Blackout Periods to Participant or Beneficiary 
Under Individual Account Plan.--
        ``(1) Duties of plan administrator.--In advance of the 
    commencement of any blackout period with respect to an individual 
    account plan, the plan administrator shall notify the plan 
    participants and beneficiaries who are affected by such action in 
    accordance with this subsection.
        ``(2) Notice requirements.--
            ``(A) In general.--The notices described in paragraph (1) 
        shall be written in a manner calculated to be understood by the 
        average plan participant and shall include--
                ``(i) the reasons for the blackout period,
                ``(ii) an identification of the investments and other 
            rights affected,
                ``(iii) the expected beginning date and length of the 
            blackout period,
                ``(iv) in the case of investments affected, a statement 
            that the participant or beneficiary should evaluate the 
            appropriateness of their current investment decisions in 
            light of their inability to direct or diversify assets 
            credited to their accounts during the blackout period, and
                ``(v) such other matters as the Secretary may require 
            by regulation.
            ``(B) Notice to participants and beneficiaries.--Except as 
        otherwise provided in this subsection, notices described in 
        paragraph (1) shall be furnished to all participants and 
        beneficiaries under the plan to whom the blackout period 
        applies at least 30 days in advance of the blackout period.
            ``(C) Exception to 30-day notice requirement.--In any case 
        in which--
                ``(i) a deferral of the blackout period would violate 
            the requirements of subparagraph (A) or (B) of section 
            404(a)(1), and a fiduciary of the plan reasonably so 
            determines in writing, or
                ``(ii) the inability to provide the 30-day advance 
            notice is due to events that were unforeseeable or 
            circumstances beyond the reasonable control of the plan 
            administrator, and a fiduciary of the plan reasonably so 
            determines in writing,
        subparagraph (B) shall not apply, and the notice shall be 
        furnished to all participants and beneficiaries under the plan 
        to whom the blackout period applies as soon as reasonably 
        possible under the circumstances unless such a notice in 
        advance of the termination of the blackout period is 
        impracticable.
            ``(D) Written notice.--The notice required to be provided 
        under this subsection shall be in writing, except that such 
        notice may be in electronic or other form to the extent that 
        such form is reasonably accessible to the recipient.
            ``(E) Notice to issuers of employer securities subject to 
        blackout period.--In the case of any blackout period in 
        connection with an individual account plan, the plan 
        administrator shall provide timely notice of such blackout 
        period to the issuer of any employer securities subject to such 
        blackout period.
        ``(3) Exception for blackout periods with limited 
    applicability.--In any case in which the blackout period applies 
    only to 1 or more participants or beneficiaries in connection with 
    a merger, acquisition, divestiture, or similar transaction 
    involving the plan or plan sponsor and occurs solely in connection 
    with becoming or ceasing to be a participant or beneficiary under 
    the plan by reason of such merger, acquisition, divestiture, or 
    transaction, the requirement of this subsection that the notice be 
    provided to all participants and beneficiaries shall be treated as 
    met if the notice required under paragraph (1) is provided to such 
    participants or beneficiaries to whom the blackout period applies 
    as soon as reasonably practicable.
        ``(4) Changes in length of blackout period.--If, following the 
    furnishing of the notice pursuant to this subsection, there is a 
    change in the beginning date or length of the blackout period 
    (specified in such notice pursuant to paragraph (2)(A)(iii)), the 
    administrator shall provide affected participants and beneficiaries 
    notice of the change as soon as reasonably practicable. In relation 
    to the extended blackout period, such notice shall meet the 
    requirements of paragraph (2)(D) and shall specify any material 
    change in the matters referred to in clauses (i) through (v) of 
    paragraph (2)(A).
        ``(5) Regulatory exceptions.--The Secretary may provide by 
    regulation for additional exceptions to the requirements of this 
    subsection which the Secretary determines are in the interests of 
    participants and beneficiaries.
        ``(6) Guidance and model notices.--The Secretary shall issue 
    guidance and model notices which meet the requirements of this 
    subsection.
        ``(7) Blackout period.--For purposes of this subsection--
            ``(A) In general.--The term `blackout period' means, in 
        connection with an individual account plan, any period for 
        which any ability of participants or beneficiaries under the 
        plan, which is otherwise available under the terms of such 
        plan, to direct or diversify assets credited to their accounts, 
        to obtain loans from the plan, or to obtain distributions from 
        the plan is temporarily suspended, limited, or restricted, if 
        such suspension, limitation, or restriction is for any period 
        of more than 3 consecutive business days.
            ``(B) Exclusions.--The term `blackout period' does not 
        include a suspension, limitation, or restriction--
                ``(i) which occurs by reason of the application of the 
            securities laws (as defined in section 3(a)(47) of the 
            Securities Exchange Act of 1934),
                ``(ii) which is a change to the plan which provides for 
            a regularly scheduled suspension, limitation, or 
            restriction which is disclosed to participants or 
            beneficiaries through any summary of material 
            modifications, any materials describing specific investment 
            alternatives under the plan, or any changes thereto, or
                ``(iii) which applies only to 1 or more individuals, 
            each of whom is the participant, an alternate payee (as 
            defined in section 206(d)(3)(K)), or any other beneficiary 
            pursuant to a qualified domestic relations order (as 
            defined in section 206(d)(3)(B)(i)).
        ``(8) Individual account plan.--
            ``(A) In general.--For purposes of this subsection, the 
        term `individual account plan' shall have the meaning provided 
        such term in section 3(34), except that such term shall not 
        include a one-participant retirement plan.
            ``(B) One-participant retirement plan.--For purposes of 
        subparagraph (A), the term `one-participant retirement plan' 
        means a retirement plan that--
                ``(i) on the first day of the plan year--

                    ``(I) covered only the employer (and the employer's 
                spouse) and the employer owned the entire business 
                (whether or not incorporated), or
                    ``(II) covered only one or more partners (and their 
                spouses) in a business partnership (including partners 
                in an S or C corporation (as defined in section 1361(a) 
                of the Internal Revenue Code of 1986)),

                ``(ii) meets the minimum coverage requirements of 
            section 410(b) of the Internal Revenue Code of 1986 (as in 
            effect on the date of the enactment of this paragraph) 
            without being combined with any other plan of the business 
            that covers the employees of the business,
                ``(iii) does not provide benefits to anyone except the 
            employer (and the employer's spouse) or the partners (and 
            their spouses),
                ``(iv) does not cover a business that is a member of an 
            affiliated service group, a controlled group of 
            corporations, or a group of businesses under common 
            control, and
                ``(v) does not cover a business that leases 
            employees.''.
        (2) Issuance of initial guidance and model notice.--The 
    Secretary of Labor shall issue initial guidance and a model notice 
    pursuant to section 101(i)(6) of the Employee Retirement Income 
    Security Act of 1974 (as added by this subsection) not later than 
    January 1, 2003. Not later than 75 days after the date of the 
    enactment of this Act, the Secretary shall promulgate interim final 
    rules necessary to carry out the amendments made by this 
    subsection.
        (3) Civil penalties for failure to provide notice.--Section 502 
    of such Act (29 U.S.C. 1132) is amended--
            (A) in subsection (a)(6), by striking ``(5), or (6)'' and 
        inserting ``(5), (6), or (7)'';
            (B) by redesignating paragraph (7) of subsection (c) as 
        paragraph (8); and
            (C) by inserting after paragraph (6) of subsection (c) the 
        following new paragraph:
    ``(7) The Secretary may assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan 
administrator's failure or refusal to provide notice to participants 
and beneficiaries in accordance with section 101(i). For purposes of 
this paragraph, each violation with respect to any single participant 
or beneficiary shall be treated as a separate violation.''.
        (3) Plan amendments.--If any amendment made by this subsection 
    requires an amendment to any plan, such plan amendment shall not be 
    required to be made before the first plan year beginning on or 
    after the effective date of this section, if--
            (A) during the period after such amendment made by this 
        subsection takes effect and before such first plan year, the 
        plan is operated in good faith compliance with the requirements 
        of such amendment made by this subsection, and
            (B) such plan amendment applies retroactively to the period 
        after such amendment made by this subsection takes effect and 
        before such first plan year.
    (c) Effective Date.--The provisions of this section (including the 
amendments made thereby) shall take effect 180 days after the date of 
the enactment of this Act. Good faith compliance with the requirements 
of such provisions in advance of the issuance of applicable regulations 
thereunder shall be treated as compliance with such provisions.

SEC. 307. RULES OF PROFESSIONAL RESPONSIBILITY FOR ATTORNEYS.

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

SEC. 308. FAIR FUNDS FOR INVESTORS.

    (a) Civil Penalties Added to Disgorgement Funds for the Relief of 
Victims.--If in any judicial or administrative action brought by the 
Commission under the securities laws (as such term is defined in 
section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(47)) the Commission obtains an order requiring disgorgement 
against any person for a violation of such laws or the rules or 
regulations thereunder, or such person agrees in settlement of any such 
action to such disgorgement, and the Commission also obtains pursuant 
to such laws a civil penalty against such person, the amount of such 
civil penalty shall, on the motion or at the direction of the 
Commission, be added to and become part of the disgorgement fund for 
the benefit of the victims of such violation.
    (b) Acceptance of Additional Donations.--The Commission is 
authorized to accept, hold, administer, and utilize gifts, bequests and 
devises of property, both real and personal, to the United States for a 
disgorgement fund described in subsection (a). Such gifts, bequests, 
and devises of money and proceeds from sales of other property received 
as gifts, bequests, or devises shall be deposited in the disgorgement 
fund and shall be available for allocation in accordance with 
subsection (a).
    (c) Study Required.--
        (1) Subject of study.--The Commission shall review and 
    analyze--
            (A) enforcement actions by the Commission over the five 
        years preceding the date of the enactment of this Act that have 
        included proceedings to obtain civil penalties or disgorgements 
        to identify areas where such proceedings may be utilized to 
        efficiently, effectively, and fairly provide restitution for 
        injured investors; and
            (B) other methods to more efficiently, effectively, and 
        fairly provide restitution to injured investors, including 
        methods to improve the collection rates for civil penalties and 
        disgorgements.
        (2) Report Required.--The Commission shall report its findings 
    to the Committee on Financial Services of the House of 
    Representatives and the Committee on Banking, Housing, and Urban 
    Affairs of the Senate within 180 days after of the date of the 
    enactment of this Act, and shall use such findings to revise its 
    rules and regulations as necessary. The report shall include a 
    discussion of regulatory or legislative actions that are 
    recommended or that may be necessary to address concerns identified 
    in the study.
    (d) Conforming Amendments.--Each of the following provisions is 
amended by inserting ``, except as otherwise provided in section 308 of 
the Sarbanes-Oxley Act of 2002'' after ``Treasury of the United 
States'':
        (1) Section 21(d)(3)(C)(i) of the Securities Exchange Act of 
    1934 (15 U.S.C. 78u(d)(3)(C)(i)).
        (2) Section 21A(d)(1) of such Act (15 U.S.C. 78u-1(d)(1)).
        (3) Section 20(d)(3)(A) of the Securities Act of 1933 (15 
    U.S.C. 77t(d)(3)(A)).
        (4) Section 42(e)(3)(A) of the Investment Company Act of 1940 
    (15 U.S.C. 80a-41(e)(3)(A)).
        (5) Section 209(e)(3)(A) of the Investment Advisers Act of 1940 
    (15 U.S.C. 80b-9(e)(3)(A)).
    (e) Definition.--As used in this section, the term ``disgorgement 
fund'' means a fund established in any administrative or judicial 
proceeding described in subsection (a).

                TITLE IV--ENHANCED FINANCIAL DISCLOSURES

SEC. 401. DISCLOSURES IN PERIODIC REPORTS.

    (a) Disclosures Required.--Section 13 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78m) is amended by adding at the end the 
following:
    ``(i) Accuracy of Financial Reports.--Each financial report that 
contains financial statements, and that is required to be prepared in 
accordance with (or reconciled to) generally accepted accounting 
principles under this title and filed with the Commission shall reflect 
all material correcting adjustments that have been identified by a 
registered public accounting firm in accordance with generally accepted 
accounting principles and the rules and regulations of the Commission.
    ``(j) Off-Balance Sheet Transactions.--Not later than 180 days 
after the date of enactment of the Sarbanes-Oxley Act of 2002, the 
Commission shall issue final rules providing that each annual and 
quarterly financial report required to be filed with the Commission 
shall disclose all material off-balance sheet transactions, 
arrangements, obligations (including contingent obligations), and other 
relationships of the issuer with unconsolidated entities or other 
persons, that may have a material current or future effect on financial 
condition, changes in financial condition, results of operations, 
liquidity, capital expenditures, capital resources, or significant 
components of revenues or expenses.''.
    (b) Commission Rules on Pro Forma Figures.--Not later than 180 days 
after the date of enactment of the Sarbanes-Oxley Act fo 2002, the 
Commission shall issue final rules providing that pro forma financial 
information included in any periodic or other report filed with the 
Commission pursuant to the securities laws, or in any public disclosure 
or press or other release, shall be presented in a manner that--
        (1) does not contain an untrue statement of a material fact or 
    omit to state a material fact necessary in order to make the pro 
    forma financial information, in light of the circumstances under 
    which it is presented, not misleading; and
        (2) reconciles it with the financial condition and results of 
    operations of the issuer under generally accepted accounting 
    principles.
    (c) Study and Report on Special Purpose Entities.--
        (1) Study required.--The Commission shall, not later than 1 
    year after the effective date of adoption of off-balance sheet 
    disclosure rules required by section 13(j) of the Securities 
    Exchange Act of 1934, as added by this section, complete a study of 
    filings by issuers and their disclosures to determine--
            (A) the extent of off-balance sheet transactions, including 
        assets, liabilities, leases, losses, and the use of special 
        purpose entities; and
            (B) whether generally accepted accounting rules result in 
        financial statements of issuers reflecting the economics of 
        such off-balance sheet transactions to investors in a 
        transparent fashion.
        (2) Report and recommendations.--Not later than 6 months after 
    the date of completion of the study required by paragraph (1), the 
    Commission shall submit a report to the President, the Committee on 
    Banking, Housing, and Urban Affairs of the Senate, and the 
    Committee on Financial Services of the House of Representatives, 
    setting forth--
            (A) the amount or an estimate of the amount of off-balance 
        sheet transactions, including assets, liabilities, leases, and 
        losses of, and the use of special purpose entities by, issuers 
        filing periodic reports pursuant to section 13 or 15 of the 
        Securities Exchange Act of 1934;
            (B) the extent to which special purpose entities are used 
        to facilitate off-balance sheet transactions;
            (C) whether generally accepted accounting principles or the 
        rules of the Commission result in financial statements of 
        issuers reflecting the economics of such transactions to 
        investors in a transparent fashion;
            (D) whether generally accepted accounting principles 
        specifically result in the consolidation of special purpose 
        entities sponsored by an issuer in cases in which the issuer 
        has the majority of the risks and rewards of the special 
        purpose entity; and
            (E) any recommendations of the Commission for improving the 
        transparency and quality of reporting off-balance sheet 
        transactions in the financial statements and disclosures 
        required to be filed by an issuer with the Commission.

SEC. 402. ENHANCED CONFLICT OF INTEREST PROVISIONS.

    (a) Prohibition on Personal Loans to Executives.--Section 13 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m), as amended by this 
Act, is amended by adding at the end the following:
    ``(k) Prohibition on Personal Loans to Executives.--
        ``(1) In general.--It shall be unlawful for any issuer (as 
    defined in section 2 of the Sarbanes-Oxley Act of 2002), directly 
    or indirectly, including through any subsidiary, to extend or 
    maintain credit, to arrange for the extension of credit, or to 
    renew an extension of credit, in the form of a personal loan to or 
    for any director or executive officer (or equivalent thereof) of 
    that issuer. An extension of credit maintained by the issuer on the 
    date of enactment of this subsection shall not be subject to the 
    provisions of this subsection, provided that there is no material 
    modification to any term of any such extension of credit or any 
    renewal of any such extension of credit on or after that date of 
    enactment.
        ``(2) Limitation.--Paragraph (1) does not preclude any home 
    improvement and manufactured home loans (as that term is defined in 
    section 5 of the Home Owners' Loan Act (12 U.S.C. 1464)), consumer 
    credit (as defined in section 103 of the Truth in Lending Act (15 
    U.S.C. 1602)), or any extension of credit under an open end credit 
    plan (as defined in section 103 of the Truth in Lending Act (15 
    U.S.C. 1602)), or a charge card (as defined in section 127(c)(4)(e) 
    of the Truth in Lending Act (15 U.S.C. 1637(c)(4)(e)), or any 
    extension of credit by a broker or dealer registered under section 
    15 of this title to an employee of that broker or dealer to buy, 
    trade, or carry securities, that is permitted under rules or 
    regulations of the Board of Governors of the Federal Reserve System 
    pursuant to section 7 of this title (other than an extension of 
    credit that would be used to purchase the stock of that issuer), 
    that is--
            ``(A) made or provided in the ordinary course of the 
        consumer credit business of such issuer;
            ``(B) of a type that is generally made available by such 
        issuer to the public; and
            ``(C) made by such issuer on market terms, or terms that 
        are no more favorable than those offered by the issuer to the 
        general public for such extensions of credit.
        ``(3) Rule of construction for certain loans.--Paragraph (1) 
    does not apply to any loan made or maintained by an insured 
    depository institution (as defined in section 3 of the Federal 
    Deposit Insurance Act (12 U.S.C. 1813)), if the loan is subject to 
    the insider lending restrictions of section 22(h) of the Federal 
    Reserve Act (12 U.S.C. 375b).''.

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

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

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

    ``(a) Disclosures Required.--
        ``(1) Directors, officers, and principal stockholders required 
    to file.--Every person who is directly or indirectly the beneficial 
    owner of more than 10 percent of any class of any equity security 
    (other than an exempted security) which is registered pursuant to 
    section 12, or who is a director or an officer of the issuer of 
    such security, shall file the statements required by this 
    subsection with the Commission (and, if such security is registered 
    on a national securities exchange, also with the exchange).
        ``(2) Time of filing.--The statements required by this 
    subsection shall be filed--
            ``(A) at the time of the registration of such security on a 
        national securities exchange or by the effective date of a 
        registration statement filed pursuant to section 12(g);
            ``(B) within 10 days after he or she becomes such 
        beneficial owner, director, or officer;
            ``(C) if there has been a change in such ownership, or if 
        such person shall have purchased or sold a security-based swap 
        agreement (as defined in section 206(b) of the Gramm-Leach-
        Bliley Act (15 U.S.C. 78c note)) involving such equity 
        security, before the end of the second business day following 
        the day on which the subject transaction has been executed, or 
        at such other time as the Commission shall establish, by rule, 
        in any case in which the Commission determines that such 2-day 
        period is not feasible.
        ``(3) Contents of statements.--A statement filed--
            ``(A) under subparagraph (A) or (B) of paragraph (2) shall 
        contain a statement of the amount of all equity securities of 
        such issuer of which the filing person is the beneficial owner; 
        and
            ``(B) under subparagraph (C) of such paragraph shall 
        indicate ownership by the filing person at the date of filing, 
        any such changes in such ownership, and such purchases and 
        sales of the security-based swap agreements as have occurred 
        since the most recent such filing under such subparagraph.
        ``(4) Electronic filing and availability.--Beginning not later 
    than 1 year after the date of enactment of the Sarbanes-Oxley Act 
    of 2002--
            ``(A) a statement filed under subparagraph (C) of paragraph 
        (2) shall be filed electronically;
            ``(B) the Commission shall provide each such statement on a 
        publicly accessible Internet site not later than the end of the 
        business day following that filing; and
            ``(C) the issuer (if the issuer maintains a corporate 
        website) shall provide that statement on that corporate 
        website, not later than the end of the business day following 
        that filing.''.
    (b) Effective Date.--The amendment made by this section shall be 
effective 30 days after the date of the enactment of this Act.

SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS.

    (a) Rules Required.--The Commission shall prescribe rules requiring 
each annual report required by section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) to contain an internal 
control report, which shall--
        (1) state the responsibility of management for establishing and 
    maintaining an adequate internal control structure and procedures 
    for financial reporting; and
        (2) contain an assessment, as of the end of the most recent 
    fiscal year of the issuer, of the effectiveness of the internal 
    control structure and procedures of the issuer for financial 
    reporting.
    (b) Internal Control Evaluation and Reporting.--With respect to the 
internal control assessment required by subsection (a), each registered 
public accounting firm that prepares or issues the audit report for the 
issuer shall attest to, and report on, the assessment made by the 
management of the issuer. An attestation made under this subsection 
shall be made in accordance with standards for attestation engagements 
issued or adopted by the Board. Any such attestation shall not be the 
subject of a separate engagement.

SEC. 405. EXEMPTION.

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

SEC. 406. CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS.

    (a) Code of Ethics Disclosure.--The Commission shall issue rules to 
require each issuer, together with periodic reports required pursuant 
to section 13(a) or 15(d) of the Securities Exchange Act of 1934, to 
disclose whether or not, and if not, the reason therefor, such issuer 
has adopted a code of ethics for senior financial officers, applicable 
to its principal financial officer and comptroller or principal 
accounting officer, or persons performing similar functions.
    (b) Changes in Codes of Ethics.--The 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 the date of enactment of this Act; and
        (2) issue final rules to implement this section, not later than 
    180 days after that date of enactment.

SEC. 407. DISCLOSURE OF AUDIT COMMITTEE FINANCIAL EXPERT.

    (a) Rules Defining ``Financial Expert''.--The Commission shall 
issue rules, as necessary or appropriate in the public interest and 
consistent with the protection of investors, to require each issuer, 
together with periodic reports required pursuant to sections 13(a) and 
15(d) of the Securities Exchange Act of 1934, to disclose whether or 
not, and if not, the reasons therefor, the audit committee of that 
issuer is comprised of at least 1 member who is a financial expert, as 
such term is defined by the Commission.
    (b) Considerations.--In defining the term ``financial expert'' for 
purposes of subsection (a), the Commission shall consider whether a 
person has, through education and experience as a public accountant or 
auditor or a principal financial officer, comptroller, or principal 
accounting officer of an issuer, or from a position involving the 
performance of similar functions--
        (1) an understanding of generally accepted accounting 
    principles and financial statements;
        (2) experience in--
            (A) the preparation or auditing of financial statements of 
        generally comparable issuers; and
            (B) the application of such principles in connection with 
        the accounting for estimates, accruals, and reserves;
        (3) experience with internal accounting controls; and
        (4) an understanding of audit committee functions.
    (c) Deadline for Rulemaking.--The Commission shall--
        (1) propose rules to implement this section, not later than 90 
    days after the date of enactment of this Act; and
        (2) issue final rules to implement this section, not later than 
    180 days after that date of enactment.

SEC. 408. ENHANCED REVIEW OF PERIODIC DISCLOSURES BY ISSUERS.

    (a) Regular and Systematic Review.--The Commission shall review 
disclosures made by issuers reporting under section 13(a) of the 
Securities Exchange Act of 1934 (including reports filed on Form 10-K), 
and which have a class of securities listed on a national securities 
exchange or traded on an automated quotation facility of a national 
securities association, on a regular and systematic basis for the 
protection of investors. Such review shall include a review of an 
issuer's financial statement.
    (b) Review Criteria.--For purposes of scheduling the reviews 
required by subsection (a), the Commission shall consider, among other 
factors--
        (1) issuers that have issued material restatements of financial 
    results;
        (2) issuers that experience significant volatility in their 
    stock price as compared to other issuers;
        (3) issuers with the largest market capitalization;
        (4) emerging companies with disparities in price to earning 
    ratios;
        (5) issuers whose operations significantly affect any material 
    sector of the economy; and
        (6) any other factors that the Commission may consider 
    relevant.
    (c) Minimum Review Period.--In no event shall an issuer required to 
file reports under section 13(a) or 15(d) of the Securities Exchange 
Act of 1934 be reviewed under this section less frequently than once 
every 3 years.

SEC. 409. REAL TIME ISSUER DISCLOSURES.

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

                 TITLE V--ANALYST CONFLICTS OF INTEREST

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

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

``SEC. 15D. SECURITIES ANALYSTS AND RESEARCH REPORTS.

    ``(a) Analyst Protections.--The Commission, or upon the 
authorization and direction of the Commission, a registered securities 
association or national securities exchange, shall have adopted, not 
later than 1 year after the date of enactment of this section, rules 
reasonably designed to address conflicts of interest that can arise 
when securities analysts recommend equity securities in research 
reports and public appearances, in order to improve the objectivity of 
research and provide investors with more useful and reliable 
information, including rules designed--
        ``(1) to foster greater public confidence in securities 
    research, and to protect the objectivity and independence of 
    securities analysts, by--
            ``(A) restricting the prepublication clearance or approval 
        of research reports by persons employed by the broker or dealer 
        who are engaged in investment banking activities, or persons 
        not directly responsible for investment research, other than 
        legal or compliance staff;
            ``(B) limiting the supervision and compensatory evaluation 
        of securities analysts to officials employed by the broker or 
        dealer who are not engaged in investment banking activities; 
        and
            ``(C) requiring that a broker or dealer and persons 
        employed by a broker or dealer who are involved with investment 
        banking activities may not, directly or indirectly, retaliate 
        against or threaten to retaliate against any securities analyst 
        employed by that broker or dealer or its affiliates as a result 
        of an adverse, negative, or otherwise unfavorable research 
        report that may adversely affect the present or prospective 
        investment banking relationship of the broker or dealer with 
        the issuer that is the subject of the research report, except 
        that such rules may not limit the authority of a broker or 
        dealer to discipline a securities analyst for causes other than 
        such research report in accordance with the policies and 
        procedures of the firm;
        ``(2) to define periods during which brokers or dealers who 
    have participated, or are to participate, in a public offering of 
    securities as underwriters or dealers should not publish or 
    otherwise distribute research reports relating to such securities 
    or to the issuer of such securities;
        ``(3) to establish structural and institutional safeguards 
    within registered brokers or dealers to assure that securities 
    analysts are separated by appropriate informational partitions 
    within the firm from the review, pressure, or oversight of those 
    whose involvement in investment banking activities might 
    potentially bias their judgment or supervision; and
        ``(4) to address such other issues as the Commission, or such 
    association or exchange, determines appropriate.
    ``(b) Disclosure.--The Commission, or upon the authorization and 
direction of the Commission, a registered securities association or 
national securities exchange, shall have adopted, not later than 1 year 
after the date of enactment of this section, rules reasonably designed 
to require each securities analyst to disclose in public appearances, 
and each registered broker or dealer to disclose in each research 
report, as applicable, conflicts of interest that are known or should 
have been known by the securities analyst or the broker or dealer, to 
exist at the time of the appearance or the date of distribution of the 
report, including--
        ``(1) the extent to which the securities analyst has debt or 
    equity investments in the issuer that is the subject of the 
    appearance or research report;
        ``(2) whether any compensation has been received by the 
    registered broker or dealer, or any affiliate thereof, including 
    the securities analyst, from the issuer that is the subject of the 
    appearance or research report, subject to such exemptions as the 
    Commission may determine appropriate and necessary to prevent 
    disclosure by virtue of this paragraph of material non-public 
    information regarding specific potential future investment banking 
    transactions of such issuer, as is appropriate in the public 
    interest and consistent with the protection of investors;
        ``(3) whether an issuer, the securities of which are 
    recommended in the appearance or research report, currently is, or 
    during the 1-year period preceding the date of the appearance or 
    date of distribution of the report has been, a client of the 
    registered broker or dealer, and if so, stating the types of 
    services provided to the issuer;
        ``(4) whether the securities analyst received compensation with 
    respect to a research report, based upon (among any other factors) 
    the investment banking revenues (either generally or specifically 
    earned from the issuer being analyzed) of the registered broker or 
    dealer; and
        ``(5) such other disclosures of conflicts of interest that are 
    material to investors, research analysts, or the broker or dealer 
    as the Commission, or such association or exchange, determines 
    appropriate.
    ``(c) Definitions.--In this section--
        ``(1) the term `securities analyst' means any associated person 
    of a registered broker or dealer that is principally responsible 
    for, and any associated person who reports directly or indirectly 
    to a securities analyst in connection with, the preparation of the 
    substance of a research report, whether or not any such person has 
    the job title of `securities analyst'; and
        ``(2) the term `research report' means a written or electronic 
    communication that includes an analysis of equity securities of 
    individual companies or industries, and that provides information 
    reasonably sufficient upon which to base an investment decision.''.
    (b) Enforcement.--Section 21B(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78u-2(a)) is amended by inserting ``15D,'' before 
``15B''.
    (c) Commission Authority.--The Commission may promulgate and amend 
its regulations, or direct a registered securities association or 
national securities exchange to promulgate and amend its rules, to 
carry out section 15D of the Securities Exchange Act of 1934, as added 
by this section, as is necessary for the protection of investors and in 
the public interest.

              TITLE VI--COMMISSION RESOURCES AND AUTHORITY

SEC. 601. AUTHORIZATION OF APPROPRIATIONS.

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

``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

    ``In addition to any other funds authorized to be appropriated to 
the Commission, there are authorized to be appropriated to carry out 
the functions, powers, and duties of the Commission, $776,000,000 for 
fiscal year 2003, of which--
        ``(1) $102,700,000 shall be available to fund additional 
    compensation, including salaries and benefits, as authorized in the 
    Investor and Capital Markets Fee Relief Act (Public Law 107-123; 
    115 Stat. 2390 et seq.);
        ``(2) $108,400,000 shall be available for information 
    technology, security enhancements, and recovery and mitigation 
    activities in light of the terrorist attacks of September 11, 2001; 
    and
        ``(3) $98,000,000 shall be available to add not fewer than an 
    additional 200 qualified professionals to provide enhanced 
    oversight of auditors and audit services required by the Federal 
    securities laws, and to improve Commission investigative and 
    disciplinary efforts with respect to such auditors and services, as 
    well as for additional professional support staff necessary to 
    strengthen the programs of the Commission involving Full Disclosure 
    and Prevention and Suppression of Fraud, risk management, industry 
    technology review, compliance, inspections, examinations, market 
    regulation, and investment management.''.

SEC. 602. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.

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

``SEC. 4C. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.

    ``(a) Authority To Censure.--The Commission may censure any person, 
or deny, temporarily or permanently, to any person the privilege of 
appearing or practicing before the Commission in any way, if that 
person is found by the Commission, after notice and opportunity for 
hearing in the matter--
        ``(1) not to possess the requisite qualifications to represent 
    others;
        ``(2) to be lacking in character or integrity, or to have 
    engaged in unethical or improper professional conduct; or
        ``(3) to have willfully violated, or willfully aided and 
    abetted the violation of, any provision of the securities laws or 
    the rules and regulations issued thereunder.
    ``(b) Definition.--With respect to any registered public accounting 
firm or associated person, for purposes of this section, the term 
`improper professional conduct' means--
        ``(1) intentional or knowing conduct, including reckless 
    conduct, that results in a violation of applicable professional 
    standards; and
        ``(2) negligent conduct in the form of--
            ``(A) a single instance of highly unreasonable conduct that 
        results in a violation of applicable professional standards in 
        circumstances in which the registered public accounting firm or 
        associated person knows, or should know, that heightened 
        scrutiny is warranted; or
            ``(B) repeated instances of unreasonable conduct, each 
        resulting in a violation of applicable professional standards, 
        that indicate a lack of competence to practice before the 
        Commission.''.

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

    (a) Securities Exchange Act of 1934.--Section 21(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)), as amended by this 
Act, is amended by adding at the end the following:
    ``(6) Authority of a court to prohibit persons from participating 
in an offering of penny stock.--
        ``(A) In general.--In any proceeding under paragraph (1) 
    against any person participating in, or, at the time of the alleged 
    misconduct who was participating in, an offering of penny stock, 
    the court may prohibit that person from participating in an 
    offering of penny stock, conditionally or unconditionally, and 
    permanently or for such period of time as the court shall 
    determine.
        ``(B) Definition.--For purposes of this paragraph, the term 
    `person participating in an offering of penny stock' includes any 
    person engaging in activities with a broker, dealer, or issuer for 
    purposes of issuing, trading, or inducing or attempting to induce 
    the purchase or sale of, any penny stock. The Commission may, by 
    rule or regulation, define such term to include other activities, 
    and may, by rule, regulation, or order, exempt any person or class 
    of persons, in whole or in part, conditionally or unconditionally, 
    from inclusion in such term.''.
    (b) Securities Act of 1933.--Section 20 of the Securities Act of 
1933 (15 U.S.C. 77t) is amended by adding at the end the following:
    ``(g) Authority of a Court To Prohibit Persons From Participating 
in an Offering of Penny Stock.--
        ``(1) In general.--In any proceeding under subsection (a) 
    against any person participating in, or, at the time of the alleged 
    misconduct, who was participating in, an offering of penny stock, 
    the court may prohibit that person from participating in an 
    offering of penny stock, conditionally or unconditionally, and 
    permanently or for such period of time as the court shall 
    determine.
        ``(2) Definition.--For purposes of this subsection, the term 
    `person participating in an offering of penny stock' includes any 
    person engaging in activities with a broker, dealer, or issuer for 
    purposes of issuing, trading, or inducing or attempting to induce 
    the purchase or sale of, any penny stock. The Commission may, by 
    rule or regulation, define such term to include other activities, 
    and may, by rule, regulation, or order, exempt any person or class 
    of persons, in whole or in part, conditionally or unconditionally, 
    from inclusion in such term.''.

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

    (a) Brokers and Dealers.--Section 15(b)(4) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o) is amended--
        (1) by striking subparagraph (F) and inserting the following:
        ``(F) is subject to any order of the Commission barring or 
    suspending the right of the person to be associated with a broker 
    or dealer;''; and
        (2) in subparagraph (G), by striking the period at the end and 
    inserting the following: ``; or
        ``(H) is subject to any final order of a State securities 
    commission (or any agency or officer performing like functions), 
    State authority that supervises or examines banks, savings 
    associations, or credit unions, State insurance commission (or any 
    agency or office performing like functions), an appropriate Federal 
    banking agency (as defined in section 3 of the Federal Deposit 
    Insurance Act (12 U.S.C. 1813(q))), or the National Credit Union 
    Administration, that--
            ``(i) bars such person from association with an entity 
        regulated by such commission, authority, agency, or officer, or 
        from engaging in the business of securities, insurance, 
        banking, savings association activities, or credit union 
        activities; or
            ``(ii) constitutes a final order based on violations of any 
        laws or regulations that prohibit fraudulent, manipulative, or 
        deceptive conduct.''.
    (b) Investment Advisers.--Section 203(e) of the Investment Advisers 
Act of 1940 (15 U.S.C. 80b-3(e)) is amended--
        (1) by striking paragraph (7) and inserting the following:
        ``(7) is subject to any order of the Commission barring or 
    suspending the right of the person to be associated with an 
    investment adviser;'';
        (2) in paragraph (8), by striking the period at the end and 
    inserting ``; or''; and
        (3) by adding at the end the following:
        ``(9) is subject to any final order of a State securities 
    commission (or any agency or officer performing like functions), 
    State authority that supervises or examines banks, savings 
    associations, or credit unions, State insurance commission (or any 
    agency or office performing like functions), an appropriate Federal 
    banking agency (as defined in section 3 of the Federal Deposit 
    Insurance Act (12 U.S.C. 1813(q))), or the National Credit Union 
    Administration, that--
            ``(A) bars such person from association with an entity 
        regulated by such commission, authority, agency, or officer, or 
        from engaging in the business of securities, insurance, 
        banking, savings association activities, or credit union 
        activities; or
            ``(B) constitutes a final order based on violations of any 
        laws or regulations that prohibit fraudulent, manipulative, or 
        deceptive conduct.''.
    (c) Conforming Amendments.--
        (1) Securities exchange act of 1934.--The Securities Exchange 
    Act of 1934 (15 U.S.C. 78a et seq.) is amended--
            (A) in section 3(a)(39)(F) (15 U.S.C. 78c(a)(39)(F))--
                (i) by striking ``or (G)'' and inserting ``(H), or 
            (G)''; and
                (ii) by inserting ``, or is subject to an order or 
            finding,'' before ``enumerated'';
            (B) in each of section 15(b)(6)(A)(i) (15 U.S.C. 
        78o(b)(6)(A)(i)), paragraphs (2) and (4) of section 15B(c) (15 
        U.S.C. 78o-4(c)), and subparagraphs (A) and (C) of section 
        15C(c)(1) (15 U.S.C. 78o-5(c)(1))--
                (i) by striking ``or (G)'' each place that term appears 
            and inserting ``(H), or (G)''; and
                (ii) by striking ``or omission'' each place that term 
            appears, and inserting ``, or is subject to an order or 
            finding,''; and
            (C) in each of paragraphs (3)(A) and (4)(C) of section 
        17A(c) (15 U.S.C. 78q-1(c))--
                (i) by striking ``or (G)'' each place that term appears 
            and inserting ``(H), or (G)''; and
                (ii) by inserting ``, or is subject to an order or 
            finding,'' before ``enumerated'' each place that term 
            appears.
        (2) Investment advisers act of 1940.--Section 203(f) of the 
    Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is amended--
            (A) by striking ``or (8)'' and inserting ``(8), or (9)''; 
        and
            (B) by inserting ``or (3)'' after ``paragraph (2)''.

                     TITLE VII--STUDIES AND REPORTS

SEC. 701. GAO STUDY AND REPORT REGARDING CONSOLIDATION OF PUBLIC 
              ACCOUNTING FIRMS.

    (a) Study Required.--The Comptroller General of the United States 
shall conduct a study--
        (1) to identify--
            (A) the factors that have led to the consolidation of 
        public accounting firms since 1989 and the consequent reduction 
        in the number of firms capable of providing audit services to 
        large national and multi-national business organizations that 
        are subject to the securities laws;
            (B) the present and future impact of the condition 
        described in subparagraph (A) on capital formation and 
        securities markets, both domestic and international; and
            (C) solutions to any problems identified under subparagraph 
        (B), including ways to increase competition and the number of 
        firms capable of providing audit services to large national and 
        multinational business organizations that are subject to the 
        securities laws;
        (2) of the problems, if any, faced by business organizations 
    that have resulted from limited competition among public accounting 
    firms, including--
            (A) higher costs;
            (B) lower quality of services;
            (C) impairment of auditor independence; or
            (D) lack of choice; and
        (3) whether and to what extent Federal or State regulations 
    impede competition among public accounting firms.
    (b) Consultation.--In planning and conducting the study under this 
section, the Comptroller General shall consult with--
        (1) the Commission;
        (2) the regulatory agencies that perform functions similar to 
    the Commission within the other member countries of the Group of 
    Seven Industrialized Nations;
        (3) the Department of Justice; and
        (4) any other public or private sector organization that the 
    Comptroller General considers appropriate.
    (c) Report Required.--Not later than 1 year after the date of 
enactment of this Act, the Comptroller General shall submit a report on 
the results of the study required by this section to the Committee on 
Banking, Housing, and Urban Affairs of the Senate and the Committee on 
Financial Services of the House of Representatives.

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

    (a) Study Required.--
        (1) In general.--The Commission shall conduct a study of the 
    role and function of credit rating agencies in the operation of the 
    securities market.
        (2) Areas of consideration.--The study required by this 
    subsection shall examine--
            (A) the role of credit rating agencies in the evaluation of 
        issuers of securities;
            (B) the importance of that role to investors and the 
        functioning of the securities markets;
            (C) any impediments to the accurate appraisal by credit 
        rating agencies of the financial resources and risks of issuers 
        of securities;
            (D) any barriers to entry into the business of acting as a 
        credit rating agency, and any measures needed to remove such 
        barriers;
            (E) any measures which may be required to improve the 
        dissemination of information concerning such resources and 
        risks when credit rating agencies announce credit ratings; and
            (F) any conflicts of interest in the operation of credit 
        rating agencies and measures to prevent such conflicts or 
        ameliorate the consequences of such conflicts.
    (b) Report Required.--The Commission shall submit a report on the 
study required by subsection (a) to the President, the Committee on 
Financial Services of the House of Representatives, and the Committee 
on Banking, Housing, and Urban Affairs of the Senate not later than 180 
days after the date of enactment of this Act.

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

    (a) Study.--The Commission shall conduct a study to determine, 
based upon information for the period from January 1, 1998, to December 
31, 2001--
        (1) the number of securities professionals, defined as public 
    accountants, public accounting firms, investment bankers, 
    investment advisers, brokers, dealers, attorneys, and other 
    securities professionals practicing before the Commission--
            (A) who have been found to have aided and abetted a 
        violation of the Federal securities laws, including rules or 
        regulations promulgated thereunder (collectively referred to in 
        this section as ``Federal securities laws''), but who have not 
        been sanctioned, disciplined, or otherwise penalized as a 
        primary violator in any administrative action or civil 
        proceeding, including in any settlement of such an action or 
        proceeding (referred to in this section as ``aiders and 
        abettors''); and
            (B) who have been found to have been primary violators of 
        the Federal securities laws;
        (2) a description of the Federal securities laws violations 
    committed by aiders and abettors and by primary violators, 
    including--
            (A) the specific provision of the Federal securities laws 
        violated;
            (B) the specific sanctions and penalties imposed upon such 
        aiders and abettors and primary violators, including the amount 
        of any monetary penalties assessed upon and collected from such 
        persons;
            (C) the occurrence of multiple violations by the same 
        person or persons, either as an aider or abettor or as a 
        primary violator; and
            (D) whether, as to each such violator, disciplinary 
        sanctions have been imposed, including any censure, suspension, 
        temporary bar, or permanent bar to practice before the 
        Commission; and
        (3) the amount of disgorgement, restitution, or any other fines 
    or payments that the Commission has assessed upon and collected 
    from, aiders and abettors and from primary violators.
    (b) Report.--A report based upon the study conducted pursuant to 
subsection (a) shall be submitted to the Committee on Banking, Housing, 
and Urban Affairs of the Senate, and the Committee on Financial 
Services of the House of Representatives not later than 6 months after 
the date of enactment of this Act.

SEC. 704. STUDY OF ENFORCEMENT ACTIONS.

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

SEC. 705. STUDY OF INVESTMENT BANKS.

    (a) GAO Study.--The Comptroller General of the United States shall 
conduct a study on whether investment banks and financial advisers 
assisted public companies in manipulating their earnings and 
obfuscating their true financial condition. The study should address 
the rule of investment banks and financial advisers--
        (1) in the collapse of the Enron Corporation, including with 
    respect to the design and implementation of derivatives 
    transactions, transactions involving special purpose vehicles, and 
    other financial arrangements that may have had the effect of 
    altering the company's reported financial statements in ways that 
    obscured the true financial picture of the company;
        (2) in the failure of Global Crossing, including with respect 
    to transactions involving swaps of fiberoptic cable capacity, in 
    the designing transactions that may have had the effect of altering 
    the company's reported financial statements in ways that obscured 
    the true financial picture of the company; and
        (3) generally, in creating and marketing transactions which may 
    have been designed solely to enable companies to manipulate revenue 
    streams, obtain loans, or move liabilities off balance sheets 
    without altering the economic and business risks faced by the 
    companies or any other mechanism to obscure a company's financial 
    picture.
    (b) Report.--The Comptroller General shall report to Congress not 
later than 180 days after the date of enactment of this Act on the 
results of the study required by this section. The report shall include 
a discussion of regulatory or legislative steps that are recommended or 
that may be necessary to address concerns identified in the study.

        TITLE VIII--CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY

SEC. 801. SHORT TITLE.

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

SEC. 802. CRIMINAL PENALTIES FOR ALTERING DOCUMENTS.

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

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

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

``Sec. 1520. Destruction of corporate audit records

    ``(a)(1) Any accountant who conducts an audit of an issuer of 
securities to which section 10A(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78j-1(a)) applies, shall maintain all audit or review 
workpapers for a period of 5 years from the end of the fiscal period in 
which the audit or review was concluded.
    ``(2) The Securities and Exchange Commission shall promulgate, 
within 180 days, after adequate notice and an opportunity for comment, 
such rules and regulations, as are reasonably necessary, relating to 
the retention of relevant records such as workpapers, documents that 
form the basis of an audit or review, memoranda, correspondence, 
communications, other documents, and records (including electronic 
records) which are created, sent, or received in connection with an 
audit or review and contain conclusions, opinions, analyses, or 
financial data relating to such an audit or review, which is conducted 
by any accountant who conducts an audit of an issuer of securities to 
which section 10A(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78j-1(a)) applies. The Commission may, from time to time, amend or 
supplement the rules and regulations that it is required to promulgate 
under this section, after adequate notice and an opportunity for 
comment, in order to ensure that such rules and regulations adequately 
comport with the purposes of this section.
    ``(b) Whoever knowingly and willfully violates subsection (a)(1), 
or any rule or regulation promulgated by the Securities and Exchange 
Commission under subsection (a)(2), shall be fined under this title, 
imprisoned not more than 10 years, or both.
    ``(c) Nothing in this section shall be deemed to diminish or 
relieve any person of any other duty or obligation imposed by Federal 
or State law or regulation to maintain, or refrain from destroying, any 
document.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by adding at the 
end the following new items:
``1519. Destruction, alteration, or falsification of records in Federal 
          investigations and bankruptcy.
``1520. Destruction of corporate audit records.''.

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

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

SEC. 804. STATUTE OF LIMITATIONS FOR SECURITIES FRAUD.

    (a) In General.--Section 1658 of title 28, United States Code, is 
amended--
        (1) by inserting ``(a)'' before ``Except''; and
        (2) by adding at the end the following:
    ``(b) Notwithstanding subsection (a), a private right of action 
that involves a claim of fraud, deceit, manipulation, or contrivance in 
contravention of a regulatory requirement concerning the securities 
laws, as defined in section 3(a)(47) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)(47)), may be brought not later than the earlier 
of--
        ``(1) 2 years after the discovery of the facts constituting the 
    violation; or
        ``(2) 5 years after such violation.''.
    (b) Effective Date.--The limitations period provided by section 
1658(b) of title 28, United States Code, as added by this section, 
shall apply to all proceedings addressed by this section that are 
commenced on or after the date of enactment of this Act.
    (c) No Creation of Actions.--Nothing in this section shall create a 
new, private right of action.

SEC. 805. REVIEW OF FEDERAL SENTENCING GUIDELINES FOR OBSTRUCTION OF 
              JUSTICE AND EXTENSIVE CRIMINAL FRAUD.

    (a) Enhancement of Fraud and Obstruction of Justice Sentences.--
Pursuant to section 994 of title 28, United States Code, and in 
accordance with this section, the United States Sentencing Commission 
shall review and amend, as appropriate, the Federal Sentencing 
Guidelines and related policy statements to ensure that--
        (1) the base offense level and existing enhancements contained 
    in United States Sentencing Guideline 2J1.2 relating to obstruction 
    of justice are sufficient to deter and punish that activity;
        (2) the enhancements and specific offense characteristics 
    relating to obstruction of justice are adequate in cases where--
            (A) the destruction, alteration, or fabrication of evidence 
        involves--
                (i) a large amount of evidence, a large number of 
            participants, or is otherwise extensive;
                (ii) the selection of evidence that is particularly 
            probative or essential to the investigation; or
                (iii) more than minimal planning; or
            (B) the offense involved abuse of a special skill or a 
        position of trust;
        (3) the guideline offense levels and enhancements for 
    violations of section 1519 or 1520 of title 18, United States Code, 
    as added by this title, are sufficient to deter and punish that 
    activity;
        (4) a specific offense characteristic enhancing sentencing is 
    provided under United States Sentencing Guideline 2B1.1 (as in 
    effect on the date of enactment of this Act) for a fraud offense 
    that endangers the solvency or financial security of a substantial 
    number of victims; and
        (5) the guidelines that apply to organizations in United States 
    Sentencing Guidelines, chapter 8, are sufficient to deter and 
    punish organizational criminal misconduct.
    (b) Emergency Authority and Deadline for Commission Action.--The 
United States Sentencing Commission is requested to promulgate the 
guidelines or amendments provided for under this section as soon as 
practicable, and in any event not later than 180 days after the date of 
enactment of this Act, in accordance with the prcedures set forth in 
section 219(a) of the Sentencing Reform Act of 1987, as though the 
authority under that Act had not expired.

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

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

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

    ``(a) Whistleblower Protection for Employees of Publicly Traded 
Companies.--No company with a class of securities registered under 
section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or 
that is required to file reports under section 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o(d)), or any officer, employee, 
contractor, subcontractor, or agent of such company, may discharge, 
demote, suspend, threaten, harass, or in any other manner discriminate 
against an employee in the terms and conditions of employment because 
of any lawful act done by the employee--
        ``(1) to provide information, cause information to be provided, 
    or otherwise assist in an investigation regarding any conduct which 
    the employee reasonably believes constitutes a violation of section 
    1341, 1343, 1344, or 1348, any rule or regulation of the Securities 
    and Exchange Commission, or any provision of Federal law relating 
    to fraud against shareholders, when the information or assistance 
    is provided to or the investigation is conducted by--
            ``(A) a Federal regulatory or law enforcement agency;
            ``(B) any Member of Congress or any committee of Congress; 
        or
            ``(C) a person with supervisory authority over the employee 
        (or such other person working for the employer who has the 
        authority to investigate, discover, or terminate misconduct); 
        or
        ``(2) to file, cause to be filed, testify, participate in, or 
    otherwise assist in a proceeding filed or about to be filed (with 
    any knowledge of the employer) relating to an alleged violation of 
    section 1341, 1343, 1344, or 1348, any rule or regulation of the 
    Securities and Exchange Commission, or any provision of Federal law 
    relating to fraud against shareholders.
    ``(b) Enforcement Action.--
        ``(1) In general.--A person who alleges discharge or other 
    discrimination by any person in violation of subsection (a) may 
    seek relief under subsection (c), by--
            ``(A) filing a complaint with the Secretary of Labor; or
            ``(B) if the Secretary has not issued a final decision 
        within 180 days of the filing of the complaint and there is no 
        showing that such delay is due to the bad faith of the 
        claimant, bringing an action at law or equity for de novo 
        review in the appropriate district court of the United States, 
        which shall have jurisdiction over such an action without 
        regard to the amount in controversy.
        ``(2) Procedure.--
            ``(A) In general.--An action under paragraph (1)(A) shall 
        be governed under the rules and procedures set forth in section 
        42121(b) of title 49, United States Code.
            ``(B) Exception.--Notification made under section 
        42121(b)(1) of title 49, United States Code, shall be made to 
        the person named in the complaint and to the employer.
            ``(C) Burdens of proof.--An action brought under paragraph 
        (1)(B) shall be governed by the legal burdens of proof set 
        forth in section 42121(b) of title 49, United States Code.
            ``(D) Statute of limitations.--An action under paragraph 
        (1) shall be commenced not later than 90 days after the date on 
        which the violation occurs.
    ``(c) Remedies.--
        ``(1) In general.--An employee prevailing in any action under 
    subsection (b)(1) shall be entitled to all relief necessary to make 
    the employee whole.
        ``(2) Compensatory damages.--Relief for any action under 
    paragraph (1) shall include--
            ``(A) reinstatement with the same seniority status that the 
        employee would have had, but for the discrimination;
            ``(B) the amount of back pay, with interest; and
            ``(C) compensation for any special damages sustained as a 
        result of the discrimination, including litigation costs, 
        expert witness fees, and reasonable attorney fees.
    ``(d) Rights Retained by Employee.--Nothing in this section shall 
be deemed to diminish the rights, privileges, or remedies of any 
employee under any Federal or State law, or under any collective 
bargaining agreement.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by inserting 
after the item relating to section 1514 the following new item:
``1514A. Civil action to protect against retaliation in fraud cases.''.

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

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

``Sec. 1348. Securities fraud

    ``Whoever knowingly executes, or attempts to execute, a scheme or 
artifice--
        ``(1) to defraud any person in connection with any security of 
    an issuer with a class of securities registered under section 12 of 
    the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is 
    required to file reports under section 15(d) of the Securities 
    Exchange Act of 1934 (15 U.S.C. 78o(d)); or
        ``(2) to obtain, by means of false or fraudulent pretenses, 
    representations, or promises, any money or property in connection 
    with the purchase or sale of any security of an issuer with a class 
    of securities registered under section 12 of the Securities 
    Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file 
    reports under section 15(d) of the Securities Exchange Act of 1934 
    (15 U.S.C. 78o(d));
shall be fined under this title, or imprisoned not more than 25 years, 
or both.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following new item:
``1348. Securities fraud.''.

           TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

SEC. 901. SHORT TITLE.

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

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

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

``Sec. 1349. Attempt and conspiracy

    ``Any person who attempts or conspires to commit any offense under 
this chapter shall be subject to the same penalties as those prescribed 
for the offense, the commission of which was the object of the attempt 
or conspiracy.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following new item:
``1349. Attempt and conspiracy.''.

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

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

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

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

SEC. 905. AMENDMENT TO SENTENCING GUIDELINES RELATING TO CERTAIN WHITE-
              COLLAR OFFENSES.

    (a) Directive to the United States Sentencing Commission.--Pursuant 
to its authority under section 994(p) of title 18, United States Code, 
and in accordance with this section, the United States Sentencing 
Commission shall review and, as appropriate, amend the Federal 
Sentencing Guidelines and related policy statements to implement the 
provisions of this Act.
    (b) Requirements.--In carrying out this section, the Sentencing 
Commission shall--
        (1) ensure that the sentencing guidelines and policy statements 
    reflect the serious nature of the offenses and the penalties set 
    forth in this Act, the growing incidence of serious fraud offenses 
    which are identified above, and the need to modify the sentencing 
    guidelines and policy statements to deter, prevent, and punish such 
    offenses;
        (2) consider the extent to which the guidelines and policy 
    statements adequately address whether the guideline offense levels 
    and enhancements for violations of the sections amended by this Act 
    are sufficient to deter and punish such offenses, and specifically, 
    are adequate in view of the statutory increases in penalties 
    contained in this Act;
        (3) assure reasonable consistency with other relevant 
    directives and sentencing guidelines;
        (4) account for any additional aggravating or mitigating 
    circumstances that might justify exceptions to the generally 
    applicable sentencing ranges;
        (5) make any necessary conforming changes to the sentencing 
    guidelines; and
        (6) assure that the guidelines adequately meet the purposes of 
    sentencing, as set forth in section 3553(a)(2) of title 18, United 
    States Code.
    (c) Emergency Authority and Deadline for Commission Action.--The 
United States Sentencing Commission is requested to promulgate the 
guidelines or amendments provided for under this section as soon as 
practicable, and in any event not later than 180 days after the date of 
enactment of this Act, in accordance with the procedures set forth in 
section 219(a) of the Sentencing Reform Act of 1987, as though the 
authority under that Act had not expired.

SEC. 906. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

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

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

    (a) Certification of Periodic Financial Reports.--Each periodic 
report containing financial statements filed by an issuer with the 
Securities Exchange Commission pursuant to section 13(a) or 15(d) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) shall 
be accompanied by a written statement by the chief executive officer 
and chief financial officer (or equivalent thereof) of the issuer.
    ``(b) Content.--The statement required under subsection (a) shall 
certify that the periodic report containing the financial statements 
fully complies with the requirements of section 13(a) or 15(d) of the 
Securities Exchange Act pf 1934 (15 U.S.C. 78m or 78o(d)) and that 
information contained in the periodic report fairly presents, in all 
material respects, the financial condition and results of operations of 
the issuer.
    ``(c) Criminal Penalties.--Whoever--
        ``(1) certifies any statement as set forth in subsections (a) 
    and (b) of this section knowing that the periodic report 
    accompanying the statement does not comport with all the 
    requirements set forth in this section shall be fined not more than 
    $1,000,000 or imprisoned not more than 10 years, or both; or
        ``(2) willfully certifies any statement as set forth in 
    subsections (a) and (b) of this section knowing that the periodic 
    report accompanying the statement does not comport with all the 
    requirements set forth in this section shall be fined not more than 
    $5,000,000, or imprisoned not more than 20 years, or both.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following:
``1350. Failure of corporate officers to certify financial reports.''.

                     TITLE X--CORPORATE TAX RETURNS

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

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

                TITLE XI--CORPORATE FRAUD ACCOUNTABILITY

SEC. 1101. SHORT TITLE.

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

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

    Section 1512 of title 18, United States Code, is amended--
        (1) by redesignating subsections (c) through (i) as subsections 
    (d) through (j), respectively; and
        (2) by inserting after subsection (b) the following new 
    subsection:
    ``(c) Whoever corruptly--
        ``(1) alters, destroys, mutilates, or conceals a record, 
    document, or other object, or attempts to do so, with the intent to 
    impair the object's integrity or availability for use in an 
    official proceeding; or
        ``(2) otherwise obstructs, influences, or impedes any official 
    proceeding, or attempts to do so,
shall be fined under this title or imprisoned not more than 20 years, 
or both.''.

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

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

                    ``(I) become effective immediately;
                    ``(II) be served upon the parties subject to it; 
                and
                    ``(III) unless set aside, limited or suspended by a 
                court of competent jurisdiction, shall remain effective 
                and enforceable for 45 days.

                ``(iv) Extensions authorized.--The effective period of 
            an order under this subparagraph may be extended by the 
            court upon good cause shown for not longer than 45 
            additional days, provided that the combined period of the 
            order shall not exceed 90 days.
            ``(B) Process on Determination of violations.--
                ``(i) Violations charged.--If the issuer or other 
            person described in subparagraph (A) is charged with any 
            violation of the Federal securities laws before the 
            expiration of the effective period of a temporary order 
            under subparagraph (A) (including any applicable extension 
            period), the order shall remain in effect, subject to court 
            approval, until the conclusion of any legal proceedings 
            related thereto, and the affected issuer or other person, 
            shall have the right to petition the court for review of 
            the order.
                ``(ii) Violations not charged.--If the issuer or other 
            person described in subparagraph (A) is not charged with 
            any violation of the Federal securities laws before the 
            expiration of the effective period of a temporary order 
            under subparagraph (A) (including any applicable extension 
            period), the escrow shall terminate at the expiration of 
            the 45-day effective period (or the expiration of any 
            extension period, as applicable), and the disputed payments 
            (with accrued interest) shall be returned to the issuer or 
            other affected person.''.
    (b) Technical Amendment.--Section 21C(c)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is amended by striking 
``This'' and inserting ``paragraph (1)''.

SEC. 1104. AMENDMENT TO THE FEDERAL SENTENCING GUIDELINES.

    (a) Request for Immediate Consideration by The United States 
Sentencing Commission.--Pursuant to its authority under section 994(p) 
of title 28, United States Code, and in accordance with this section, 
the United States Sentencing Commission is requested to--
        (1) promptly review the sentencing guidelines applicable to 
    securities and accounting fraud and related offenses;
        (2) expeditiously consider the promulgation of new sentencing 
    guidelines or amendments to existing sentencing guidelines to 
    provide an enhancement for officers or directors of publicly traded 
    corporations who commit fraud and related offenses; and
        (3) submit to Congress an explanation of actions taken by the 
    Sentencing Commission pursuant to paragraph (2) and any additional 
    policy recommendations the Sentencing Commission may have for 
    combating offenses described in paragraph (1).
    (b) Considerations in Review.--In carrying out this section, the 
Sentencing Commission is requested to--
        (1) ensure that the sentencing guidelines and policy statements 
    reflect the serious nature of securities, pension, and accounting 
    fraud and the need for aggressive and appropriate law enforcement 
    action to prevent such offenses;
        (2) assure reasonable consistency with other relevant 
    directives and with other guidelines;
        (3) account for any aggravating or mitigating circumstances 
    that might justify exceptions, including circumstances for which 
    the sentencing guidelines currently provide sentencing 
    enhancements;
        (4) ensure that guideline offense levels and enhancements for 
    an obstruction of justice offense are adequate in cases where 
    documents or other physical evidence are actually destroyed or 
    fabricated;
        (5) ensure that the guideline offense levels and enhancements 
    under United States Sentencing Guideline 2B1.1 (as in effect on the 
    date of enactment of this Act) are sufficient for a fraud offense 
    when the number of victims adversely involved is significantly 
    greater than 50;
        (6) make any necessary conforming changes to the sentencing 
    guidelines; and
        (7) assure that the guidelines adequately meet the purposes of 
    sentencing as set forth in section 3553 (a)(2) of title 18, United 
    States Code.
    (c) Emergency Authority and Deadline For Commission Action.--The 
United States Sentencing Commission is requested to promulgate the 
guidelines or amendments provided for under this section as soon as 
practicable, and in any event not later than the 180 days after the 
date of enactment of this Act, in accordance with the procedures sent 
forth in section 21(a) of the Sentencing Reform Act of 1987, as though 
the authority under that Act had not expired.

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

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

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

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

SEC. 1107. RETALIATION AGAINST INFORMANTS.

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

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.