[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3763 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 3763

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 14, 2002

   Mr. Oxley (for himself, Mr. Baker, Mr. Boehner, Mrs. Roukema, Mr. 
 Bereuter, Mr. Bachus, Mrs. Kelly, Mr. Castle, Mr. Royce, Mr. Ney, Mr. 
  Gillmor, Mr. Cox, Mr. LaTourette, Mr. Manzullo, Mr. Jones of North 
Carolina, Mr. Ose, Mr. Green of Wisconsin, Mr. Toomey, Mr. Shadegg, Mr. 
 Fossella, Mr. Cantor, Ms. Hart, Mr. Ferguson, Mr. Rogers of Michigan, 
 and Mr. Tiberi) introduced the following bill; which was referred to 
                  the Committee on Financial Servcies

_______________________________________________________________________

                                 A BILL


 
   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.

    This Act may be cited as the ``Corporate and Auditing 
Accountability, Responsibility, and Transparency Act of 2002''.

SEC. 2. AUDITOR OVERSIGHT.

    (a) Certified Financial Statement Requirements.--If a financial 
statement is required by the securities laws or any rule or regulation 
thereunder to be certified by an independent public or certified 
accountant, such accountant shall not be considered to be qualified to 
certify such financial statement, and the Securities and Exchange 
Commission shall not accept a financial statement certified by such 
accountant, unless such accountant--
            (1) is subject to a system of review by a public regulatory 
        organization that complies with the requirements of this 
        section and the rules prescribed by the Commission under this 
        section; and
            (2) has not been determined in the most recent review 
        completed under such system to be not qualified to certify such 
        a statement.
    (b) Establishment of PRO.--The Commission shall by rule establish 
the criteria by which a public regulatory organization may be 
recognized for purposes of this section. Such criteria shall include 
the following requirements:
            (1) The board of such organization shall be comprised of 
        both members of the accounting profession and public members 
        who are not members of the accounting profession, and such 
        public members shall comprise at least two-thirds of the board 
        of such organization.
            (2) Such organization is so organized and has the 
        capacity--
                    (A) to be able to carry out the purposes of this 
                section and to comply, and to enforce compliance by 
                accountants and persons associated with accountants, 
                with the provisions of this Act, the securities laws, 
                the rules and regulations thereunder, and the rules of 
                the organization;
                    (B) to perform a review of the work product 
                (including the quality thereof) of an accountant or a 
                person associated with an accountant; and
                    (C) to perform a review of any potential conflicts 
                of interest between an accountant (or a person 
                associated with an accountant) and the issuer, the 
                issuer's board of directors and committees thereof, 
                officers, and affiliates of such issuer, that may 
                result in an impairment of auditor independence.
            (3) Such organization shall have the authority to impose 
        sanctions, including a determination that an accountant is not 
        qualified to certify a financial statement, or any categories 
of financial statements, required by the securities laws, or that a 
person associated with an accountant is not qualified to participate in 
such certification, if, after conducting a review and providing an 
opportunity for a hearing, the organization finds that--
                    (A) such accountant or person associated with an 
                accountant has violated the standards of independence, 
                ethics, or competency in the profession;
                    (B) such accountant or person associated with an 
                accountant has violated the securities laws or a rule 
                or regulation thereunder;
                    (C) an audit conducted by such accountant or any 
                person associated with an accountant has been 
                materially affected by an impairment of auditor 
                independence;
                    (D) such accountant or person associated with an 
                accountant has performed both auditing services and 
                consulting services in violation of the rules 
                prescribed by the Commission pursuant to subsection 
                (c); and
                    (E) such accountant or any person associated with 
                an accountant has impeded, obstructed, or otherwise not 
                cooperated in such review.
            (4) Any such organization shall disclose publicly, and make 
        available for public comment, proposed procedures and methods 
        for conducting such reviews.
            (5) Any such organization shall have in place procedures to 
        minimize and deter conflicts of interest involving the public 
        members of such organization, and have in place procedures to 
        resolve such conflicts.
            (6) Any such organization shall have in place procedures 
        for notifying the boards of accountancy of the States of the 
        results of reviews, including any findings under paragraphs (2) 
        and (3).
            (7) Any such organization shall have in place procedures 
        for notifying the Commission of any findings of such reviews, 
        including any findings regarding suspected violations of the 
        securities laws.
            (8) Any such organization shall consult with boards of 
        accountancy of the States.
            (9) Any such organization shall have in place a mechanism 
        to allow the organization to operate on a self-funded basis. 
        Such funding mechanism shall ensure that such organization is 
        not solely dependent upon members of the accounting profession 
        for such funding and operations.
    (c) Prohibition on the Offer of Both Audit and Consulting 
Services.--
            (1) Modification of regulations required.--The Commission 
        shall revise its regulations pertaining to auditor independence 
        to require that an accountant shall not be considered 
        independent with respect to an audit client if the accountant 
        provides to the client the following non-audit services (as 
        such term is defined in such regulations as in effect on the 
        date of enactment of this Act)--
                    (A) financial information system design or 
                implementation; or
                    (B) internal audit services.
            (2) Deadline for rulemaking.--The Commission shall 
        prescribe the revisions to its regulations required by 
        paragraph (1) within 180 days after the date of enactment of 
        this Act.
    (d) PRO Accountant Review Proceedings.--
            (1) Review proceeding findings.--Any accountant review 
        conducted under this section shall include any finding that a 
        financial statement audited by such accountant and submitted to 
        the Commission may have been materially affected by an 
        impairment of independence, or by a violation of the securities 
        laws or a rule or regulation thereunder. Such findings shall be 
        submitted to the Commission. The Commission shall immediately 
        notify an issuer of any such finding that relates to the 
        financial statements of such issuer.
            (2) Confidential treatment of proceedings pending sec 
        review.--Except as otherwise provided in this section, but 
        notwithstanding any other provision of law, neither the 
        Commission nor a recognized public regulatory organization 
        shall be compelled to disclose any information concerning any 
        accountant review proceeding and the findings therein. Nothing 
        in this subsection shall authorize the Commission to withhold 
        information from Congress, or prevent the Commission from 
        complying with a request for information from any other Federal 
        department or agency requesting information for purposes within 
        the scope of its jurisdiction, or complying with an order of a 
        court of the United States in an action brought by the United 
        States or the Commission. Neither the Commission nor the 
        recognized public regulatory organization shall disclose the 
        results of any such finding until the completion of any review 
        by the Commission under subsections (d) and (e), or the 
        conclusion of the 30-day period for seeking review if no motion 
        seeking review is filed within such period. For purposes of 
        section 552 of title 5, United States Code, this subsection 
        shall be considered a statute described in subsection (b)(3)(B) 
        of such section 552.
    (e) Review of Sanctions.--
            (1) Notice.--If any recognized public regulatory 
        organization--
                    (A) makes a finding with respect to or imposes any 
                final disciplinary sanction on any accountant;
                    (B) prohibits or limits any person in respect to 
                access to services offered by such organization; or
                    (C) makes a finding with respect to or imposes any 
                final disciplinary sanction on any person associated 
                with an accountant or bars any person from becoming 
                associated with an accountant,
        the recognized public regulatory organization shall promptly 
        submit notice thereof with the Commission. The notice shall be 
        in such form and contain such information as the Commission, by 
        rule, may prescribe as necessary or appropriate in furtherance 
of the purposes of this section.
            (2) Review by commission.--Any action with respect to which 
        a recognized public regulatory organization is required by 
        paragraph (1) of this subsection to submit notice shall be 
        subject to review by the Commission, on its own motion, or upon 
        application by any person aggrieved thereby filed within 30 
        days after the date such notice was filed with the Commission 
        and received by such aggrieved person, or within such longer 
        period as the Commission may determine. Application to the 
        Commission for review, or the institution of review by the 
        Commission on its own motion, shall not operate as a stay of 
        such action unless the Commission otherwise 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). The Commission 
        shall establish for appropriate cases an expedited procedure 
        for consideration and determination of the question of a stay.
    (f) Conduct of Commission Review.--
            (1) Basis for action.--In any proceeding to review a final 
        disciplinary sanction imposed by a recognized public regulatory 
        organization on an accountant or a person associated with such 
        accountant, after notice and opportunity for hearing (which 
        hearing may consist solely of consideration of the record 
        before the recognized public regulatory organization and 
        opportunity for the presentation of supporting reasons to 
        affirm, modify, or set aside the sanction)--
                    (A) if the Commission finds that such accountant or 
                person associated with an accountant has engaged in 
                such acts or practices, or has omitted such acts, as 
                the recognized public regulatory organization has found 
                him to have engaged in or omitted, that such acts or 
                practices, or omissions to act, are in violation of 
                such provisions of this section, the securities laws, 
                the rules or regulations thereunder, or the rules of 
                the recognized public regulatory organization, as have 
                been specified in the determination of the public 
                regulatory organization, and that such provisions are, 
                and were applied in a manner, consistent with the 
                purposes of this section, the Commission, by order, 
                shall so declare and, as appropriate, affirm the 
                sanction imposed by the recognized public regulatory 
                organization, modify the sanction in accordance with 
                paragraph (2) of this subsection, or remand to the 
                recognized public regulatory organization for further 
                proceedings; or
                    (B) if the Commission does not make any such 
                finding, it shall, by order, set aside the sanction 
                imposed by the recognized public regulatory 
                organization and, if appropriate, remand to the 
                recognized public regulatory organization for further 
                proceedings.
            (2) Reduction of sanctions.--If the Commission, having due 
        regard for the public interest and the protection of investors, 
        finds after a proceeding in accordance with paragraph (1) of 
        this subsection that a sanction imposed by a recognized public 
        regulatory organization upon an accountant or person associated 
        with an accountant imposes any burden on competition not 
        necessary or appropriate in furtherance of the purposes of this 
        Act or is excessive or oppressive, the Commission may cancel, 
        reduce, or require the remission of such sanction.
    (g) Review and Approval of Rules.--
            (1) Submission, publication, and comment.--Each recognized 
        public regulatory organization shall file with the Commission, 
        in accordance with such rules as the Commission may prescribe, 
        copies of any proposed rule or any proposed change in, addition 
        to, or deletion from the rules of such recognized public 
        regulatory organization (hereinafter in this subsection 
        collectively referred to as a ``proposed rule change'') 
        accompanied by a concise general statement of the basis and 
        purpose of such proposed rule change. The Commission shall, 
        upon the filing of any proposed rule change, publish notice 
        thereof together with the terms of substance of the proposed 
        rule change or a description of the subjects and issues 
        involved. The Commission shall give interested persons an 
        opportunity to submit written data, views, and arguments 
        concerning such proposed rule change. No proposed rule change 
        shall take effect unless approved by the Commission or 
        otherwise permitted in accordance with the provisions of this 
        subsection.
            (2) Approval or proceedings.--Within 35 days of the date of 
        publication of notice of the filing of a proposed rule change 
        in accordance with paragraph (1) of this subsection, or within 
        such longer period as the Commission may designate up to 90 
        days of such date if it finds such longer period to be 
        appropriate and publishes its reasons for so finding or as to 
        which the recognized public regulatory organization consents, 
        the Commission shall--
                    (A) by order approve such proposed rule change; or
                    (B) institute proceedings to determine whether the 
                proposed rule change should be disapproved. Such 
                proceedings shall include notice of the grounds for 
                disapproval under consideration and opportunity for 
                hearing and be concluded within 180 days of the date of 
                publication of notice of the filing of the proposed 
                rule change. At the conclusion of such proceedings the 
                Commission, by order, shall approve or disapprove such 
                proposed rule change. The Commission may extend the 
                time for conclusion of such proceedings for up to 60 
                days if it finds good cause for such extension and 
                publishes its reasons for so finding or for such longer 
                period as to which the recognized public regulatory 
                organization consents.
            (3) Basis for approval or disapproval.--The Commission 
        shall approve a proposed rule change of a recognized public 
        regulatory organization if it finds that such proposed rule 
        change is consistent with the requirements of this Act and 
the rules and regulations thereunder applicable to such organization. 
The Commission shall disapprove a proposed rule change of a recognized 
public regulatory organization if it does not make such finding. The 
Commission shall not approve any proposed rule change prior to the 30th 
day after the date of publication of notice of the filing thereof, 
unless the Commission finds good cause for so doing and publishes its 
reasons for so finding.
            (4) Rules effective upon filing.--
                    (A) Notwithstanding the provisions of paragraph (2) 
                of this subsection, a proposed rule change may take 
                effect upon filing with the Commission if designated by 
                the recognized public regulatory organization as (i) 
                constituting a stated policy, practice, or 
                interpretation with respect to the meaning, 
                administration, or enforcement of an existing rule of 
                the recognized public regulatory organization, (ii) 
                establishing or changing a due, fee, or other charge 
                imposed by the recognized public regulatory 
                organization, or (iii) concerned solely with the 
                administration of the recognized public regulatory 
                organization or other matters which the Commission, by 
                rule, consistent with the public interest and the 
                purposes of this subsection, may specify as outside the 
                provisions of such paragraph (2).
                    (B) Notwithstanding any other provision of this 
                subsection, a proposed rule change may be put into 
                effect summarily if it appears to the Commission that 
                such action is necessary for the protection of 
                investors, or otherwise in the public interest. Any 
                proposed rule change so put into effect shall be filed 
                promptly thereafter in accordance with the provisions 
                of paragraph (1) of this subsection.
                    (C) Any proposed rule change of a recognized public 
                regulatory organization which has taken effect pursuant 
                to subparagraph (A) or (B) of this paragraph may be 
                enforced by such organization to the extent it is not 
                inconsistent with the provisions of this Act, the 
                securities laws, the rules and regulations thereunder, 
                and applicable Federal and State law. At any time 
                within 60 days of the date of filing of such a proposed 
                rule change in accordance with the provisions of 
                paragraph (1) of this subsection, the Commission 
                summarily may abrogate the change in the rules of the 
                recognized public regulatory organization made thereby 
                and require that the proposed rule change be refiled in 
                accordance with the provisions of paragraph (1) of this 
                subsection and reviewed in accordance with the 
                provisions of paragraph (2) of this subsection, if it 
                appears to the Commission that such action is necessary 
                or appropriate in the public interest, for the 
                protection of investors, or otherwise in furtherance of 
                the purposes of this Act. Commission action pursuant to 
                the preceding sentence shall not affect the validity or 
                force of the rule change during the period it was in 
                effect, shall not be subject to court review, and shall 
                not be deemed to be ``final agency action'' for 
                purposes of section 704 of title 5, United States Code.
    (h) Commission Action To Change Rules.--The Commission, by rule, 
may abrogate, add to, and delete from (hereinafter in this subsection 
collectively referred to as ``amend'') the rules of a recognized public 
regulatory organization as the Commission deems necessary or 
appropriate to insure the fair administration of the recognized public 
regulatory organization, to conform its rules to requirements of this 
Act, the securities laws, and the rules and regulations thereunder 
applicable to such organization, or otherwise in furtherance of the 
purposes of this Act, in the following manner:
            (1) The Commission shall notify the recognized public 
        regulatory organization and publish notice of the proposed 
        rulemaking in the Federal Register. The notice shall include 
        the text of the proposed amendment to the rules of the 
        recognized public regulatory organization and a statement of 
        the Commission's reasons, including any pertinent facts, for 
        commencing such proposed rulemaking.
            (2) The Commission shall give interested persons an 
        opportunity for the oral presentation of data, views, and 
        arguments, in addition to an opportunity to make written 
        submissions. A transcript shall be kept of any oral 
        presentation.
            (3) A rule adopted pursuant to this subsection shall 
        incorporate the text of the amendment to the rules of the 
        recognized public regulatory organization and a statement of 
        the Commission's basis for and purpose in so amending such 
        rules. This statement shall include an identification of any 
        facts on which the Commission considers its determination so to 
        amend the rules of the recognized public regulatory agency to 
        be based, including the reasons for the Commission's 
        conclusions as to any of such facts which were disputed in the 
        rulemaking.
            (4)(A) Except as provided in paragraphs (1) through (3) of 
        this subsection, rulemaking under this subsection shall be in 
        accordance with the procedures specified in section 553 of 
        title 5, United States Code, for rulemaking not on the record.
            (B) Nothing in this subsection shall be construed to impair 
        or limit the Commission's power to make, or to modify or alter 
        the procedures the Commission may follow in making, rules and 
        regulations pursuant to any other authority under the 
        securities laws.
            (C) Any amendment to the rules of a recognized public 
        regulatory organization made by the Commission pursuant to this 
        subsection shall be considered for all purposes to be part of 
        the rules of such recognized public regulatory organization and 
        shall not be considered to be a rule of the Commission.
    (i) Rulemaking Deadline.--The Commission shall prescribe rules to 
implement this section within 180 days after the date of enactment of 
this Act.
    (j) Effective Date; Transition Provisions.--
            (1) Effective date.--Except as provided in paragraph (2), 
        subsection (a) of this section shall be effective with respect 
        to any certified financial statement for any fiscal year that 
        ends more than one year after the Commission recognizes a 
        public regulatory organization pursuant to this section.
            (2) Delay in establishment of board.--If the Commission has 
        failed to recognize any public regulatory organization pursuant 
        to this section within one year after the date of enactment of 
        this Act, the Commission shall perform the duties of such 
        organization with respect to any certified financial statement 
        for any fiscal year that ends before one year after any such 
        board is recognized by the Commission.

SEC. 3. IMPROPER INFLUENCE ON CONDUCT OF AUDITS.

    It shall be unlawful in contravention of such rules and regulations 
as the Commission shall prescribe as necessary and appropriate in the 
public interest or for the protection of investors for any officer, 
director, or affiliated person of an issuer of any security registered 
under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) 
to take any action to willfully and improperly influence, coerce, 
manipulate, or mislead any independent public or certified accountant 
engaged in the performance of an audit of the financial statements of 
such issuer for the purpose of rendering such financial statements 
materially misleading. In any civil proceeding, the Commission shall 
have exclusive authority to enforce this section and any rule or 
regulation hereunder.

SEC. 4. REAL-TIME DISCLOSURE OF FINANCIAL INFORMATION.

    (a) Real-Time Issuer Disclosures Required.--
            (1) Obligations.--Every issuer of a security registered 
        under section 12 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78l) shall file with the Commission and disclose to the 
        public, on a rapid and essentially contemporaneous basis, such 
        information concerning the financial condition or operations of 
        such issuer as the Commission determines by rule is necessary 
        in the public interest and for the protection of investors. 
        Such rule shall--
                    (A) specify the events or circumstances giving rise 
                to the obligation to disclose or update a disclosure;
                    (B) establish requirements regarding the rapidity 
                and timeliness of such disclosure;
                    (C) identify the means whereby the disclosure 
                required shall be made, which shall ensure the broad, 
                rapid, and accurate dissemination of the information to 
                the public via electronic or other communications 
                device;
                    (D) identify the content of the information to be 
                disclosed; and
                    (E) without limiting the Commission's general 
                exemptive authority, specify any exemptions or 
                exceptions from such requirements.
            (2) Enforcement.--The Commission shall have exclusive 
        authority to enforce this section and any rule or regulation 
        hereunder in civil proceedings.
    (b) Electronic Disclosure of Insider and Affiliate Transactions.--
            (1) Disclosures of trading.--The Commission shall, by rule, 
        require that any disclosure required by the securities laws or 
        any rule or regulation thereunder of the sale of any securities 
        by an officer, director, or other affiliated person of the 
        issuer of those securities shall be made available 
        electronically--
                    (A) to the Commission by the officer, director, or 
                affiliated person, before the end of the next business 
                day after the day on which the transaction occurs;
                    (B) to the public by the Commission, to the extent 
                permitted under applicable law, upon receipt, but in no 
                case later than the end of the next business day after 
                the day on which the disclosure is received under 
                subparagraph (A); and
                    (C) in any case in which the issuer maintains a 
                corporate website, on that website, before the end of 
                the next business day after the day on which the 
                disclosure is received by the Commission under 
                subparagraph (A).
            (2) Other formats; forms.--In the rule prescribed under 
        paragraph (1), the Commission shall provide that electronic 
        filing and disclosure shall be in lieu of any other format 
        required for such disclosures on the day before the date of 
        enactment of this subsection. The Commission shall revise all 
        forms and schedules required to be filed with the Commission 
        pursuant to paragraph (1) in order to facilitate such 
        electronic filing and disclosure.

SEC. 5. INSIDER TRADES DURING PENSION FUND BLACKOUT PERIODS PROHIBITED.

    (a) Prohibition.--It shall be unlawful for any 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 under section 12 of the Securities Exchange Act of 
1934 (15 U.S.C. 78l) or who is a director or an officer of the issuer 
of such security, directly or indirectly, to purchase (or otherwise 
acquire) or sell (or otherwise transfer) any equity security of any 
issuer (other than an exempted security), during any blackout period 
with respect to such equity security.
    (b) Remedy.--Any profit realized by such beneficial owner, 
director, or officer from any purchase (or other acquisition) or sale 
(or other transfer) in violation of this section shall inure to and be 
recoverable by the issuer irrespective of any intention on the part of 
such beneficial owner, director, or officer in entering into the 
transaction. Suit to recover such profit 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 shall fail or refuse to bring such suit within 60 
days after request or shall fail diligently to prosecute the same 
thereafter; but no such suit shall be brought more than 2 years after 
the date such profit was realized. This subsection shall not be 
construed to cover any transaction where such beneficial owner was not 
such both at the time of the purchase and sale, or the sale and 
purchase, of the security or security-based swap (as defined in section 
206B of the Gramm-Leach-Bliley Act) involved, or any transaction 
or transactions which the Commission by rules and regulations may 
exempt as not comprehended within the purposes of this subsection.
    (c) Rulemaking Permitted.--The Commission may issue rules to 
clarify the application of this subsection, to ensure adequate notice 
to all persons affected by this subsection, and to prevent evasion 
thereof.

SEC. 6. IMPROVED TRANSPARENCY OF CORPORATE DISCLOSURES.

    (a) Modification of Regulations Required.--The Commission shall 
revise its regulations under the securities laws pertaining to the 
disclosures required in periodic financial reports and registration 
statements to require such reports to include adequate and appropriate 
disclosure of--
            (1) the issuer's off-balance sheet transactions and 
        relationships with unconsolidated entities or other persons, to 
        the extent they are not disclosed in the financial statements 
        and are reasonably likely to materially affect liquidity or the 
        availability of, or requirements for, capital resources, or 
        otherwise expose the issuer to material current or future 
        possible liability, obligations, expenses, or cash flow 
        changes, or affect the recognition of revenue, carrying value, 
        or potential impairment of assets, credit ratings, earnings, 
        cash flows, or stock price; and
            (2) relationships and material transactions with related or 
        other persons or entities that may involve transactions on 
        terms that differ materially from those that would likely be 
        negotiated with third parties, including a description of the 
        elements of the transactions that are necessary for an 
        understanding of their business purpose and economic substance, 
        their effects on the financial statements, and the special 
        risks or contingencies arising from the transactions.
    (b) Deadline for Rulemaking.--The Commission shall prescribe the 
revisions to its regulations required by paragraph (1) within 180 days 
after the date of enactment of this Act.
    (c) Analysis Required.--
            (1) Transparency, completeness, and usefulness of financial 
        statements.--The Commission shall conduct an analysis of the 
        extent to which, consistent with the protection of investors 
        and the public interest, disclosure of additional or 
        reorganized information may be required to improve the 
        transparency, completeness, or usefulness of financial 
        statements and other corporate disclosures filed under the 
        securities laws.
            (2) Alternatives to be considered.--In conducting the 
        analysis required by paragraph (1), the Commission shall 
        consider--
                    (A) requiring the identification of the key 
                accounting principles that are most important to the 
                issuer's reported financial condition or results of 
                operation, and that require management's most 
                difficult, subjective, or complex judgments;
                    (B) requiring an explanation, where material, of 
                how different available accounting principles applied, 
                the judgments made in their application, and the 
                likelihood of materially different reported results if 
                different assumptions of conditions were to prevail;
                    (C) in the case of any issuer engaged in the 
                business of trading non-exchange traded contracts, 
                requiring an explanation of such trading activities 
                when such activities require the issuer to account for 
                contracts at fair value, but for which a lack of market 
                price quotations necessitates the use of fair value 
                estimation techniques;
                    (D) establishing requirements relating to the 
                presentation of information in plain language; and
                    (E) requiring such other disclosures, included in 
                the financial statements or in other disclosure by the 
                issuer, as would in the Commission's view improve the 
                transparency of such issuer's financial statements and 
                other required corporate disclosures.
            (3) Rules required.--If the Commission, on the basis of the 
        analysis required by this subsection, determines that it is 
        necessary in the public interest or for the protection of 
        investors, would improve the transparency of issuer financial 
        statements, and would not be unduly burdensome on issuers, the 
        Commission shall prescribe rules reflecting the results of such 
        analysis and the considerations required by paragraph (2).

SEC. 7. STUDY OF RULES RELATING TO ANALYST CONFLICTS OF INTEREST.

    (a) Study and Review Required.--The Commission shall conduct a 
study and review of any final rules by any self-regulatory organization 
registered with the Commission related to matters involving equity 
research analysts conflicts of interest. Such study and report shall 
include a review of the effectiveness of such final rules in addressing 
matters relating to the objectivity and integrity of equity research 
analyst reports and recommendations.
    (b) Report Required.--The Commission shall submit a report to the 
Committee on Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate on such 
study and review no later than 180 days after any such final rules by 
any self-regulatory organization registered with the Commission are 
delivered to the Commission. Such report shall include recommendations 
to the Congress, including any recommendations for additional self-
regulatory organization rulemaking regarding matters involving equity 
research analysts. The Commission shall annually submit an update on 
such review.

SEC. 8. OVERSIGHT OF FINANCIAL DISCLOSURES.

    (a) Minimum Periodic Review Requirements.--The Commission shall set 
minimum periodic review requirements to ensure that issuers with the 
largest market capitalization, most actively traded securities, or most 
widely held securities will be subject to a regular and thorough review 
by the Commission, including substantive comments where appropriate on 
the issuer's financial statements and all other disclosures.
    (b) Annual Reports Required.--The Securities and Exchange 
Commission shall report to the Committee on Financial Services of the 
House of Representatives and the Committee on Banking, Housing, and 
Urban Affairs of the Senate on an annual basis on its compliance with 
these requirements.

SEC. 9. REVIEW OF CORPORATE GOVERNANCE PRACTICES.

    (a) Study of Corporate Practices.--The President's Working Group on 
Financial Markets shall conduct a study and review of current corporate 
governance standards and practices to determine whether such standards 
and practices are serving the best interests of shareholders. Such 
study and review shall include an analysis of--
            (1) whether current standards and practices promote full 
        disclosure of relevant information to shareholders;
            (2) whether corporate codes of ethics are adequate to 
        protect shareholders, and to what extent deviations from such 
        codes are tolerated;
            (3) to what extent conflicts of interests are aggressively 
        reviewed, and whether adequate means for redressing such 
        conflicts exist;
            (4) to what extent sufficient legal protections exist to 
        ensure that any manager who attempts to manipulate or unduly 
        influence an audit is subject to appropriate sanction and 
        liability;
            (5) whether rules, standards, and practices relating to 
        determining whether independent directors are in fact 
        independent are adequate;
            (6) whether rules, standards, and practices relating to the 
        independence of directors serving on audit committees are 
        uniformly applied and adequate to protect investor interests;
            (7) whether the duties and responsibilities of audit 
        committees should be established by the Commission; and
            (8) what further or additional practices or standards might 
        best protect investors and promote the interests of 
        shareholders.
    (b) Participation of State Regulators.--In conducting the study 
required under subsection (a), the President's Working Group on 
Financial Markets shall seek the views of, and consult with, the 
securities and corporate regulators of the various States.
    (c) Report Required.--The President's Working Group on Financial 
Markets shall submit a report on the analysis required under subsection 
(a) to the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing, and Urban 
Affairs of the Senate no later than 180 days after the date of 
enactment of this Act.

SEC. 10. 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 all restatements of 
financial statements, over the last five years 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 
within 180 days of the date of enactment of this Act and shall use such 
findings to revise its rules and regulations, as necessary.

SEC. 11. STUDY OF CREDIT RATING AGENCIES.

    (a) Study Required.--The Commission shall conduct a study of the 
role and function of credit rating agencies in the operation of the 
securities market. Such study shall examine--
            (1) the role of the credit rating agencies in the 
        evaluation of issuers of securities;
            (2) the importance of that role to investors and the 
        functioning of the securities markets;
            (3) any impediments to the accurate appraisal by credit 
        rating agencies of the financial resources and risks of issuers 
        of securities;
            (4) any barriers to entry into the business of acting as a 
        credit rating agency, and any measures needed to remove such 
        barriers;
            (5) 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
            (6) 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 
analysis 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 within 180 days 
after the date of enactment of this Act.

SEC. 12. ENFORCEMENT AUTHORITY.

    For the purposes of enforcing and carrying out this Act, the 
Commission shall have all of the authorities granted to the Commission 
under the securities laws. Actions of the Commission under this Act, 
including actions on rules or regulations, shall be subject to review 
in the same manner as actions under the securities laws.

SEC. 13. DEFINITIONS.

    As used in this Act:
            (1) Blackout period.--The term ``blackout period'' with 
        respect to the equity securities of any issuer--
                    (A) means any period during which the employees of 
                such issuer are precluded from purchasing (or otherwise 
                acquiring) or selling (or otherwise transferring) their 
                interest in any equity security of such issuer held in 
                an individual account plan of such issuer; but
                    (B) does not include a period in which the 
                employees of an issuer may not allocate their interests 
                in the individual account plan due to an express 
                investment restriction--
                            (i) incorporated into the individual 
                        account plan; and
                            (ii) timely disclosed to employees before 
                        joining the individual account plan or as a 
                        subsequent amendment to the plan.
            (2) Boards of accountancy of the states.--The term ``boards 
        of accountancy of the States'' means any organization or 
        association chartered or approved under the law of any State 
        with responsibility for the registration, supervision, or 
        regulation of accountants.
            (3) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (4) Individual account plan.--The term ``individual account 
        plan'' has the meaning provided such term in section 3(34) of 
        the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1002(34)).
            (5) Issuer.--The term ``issuer'' shall have the meaning set 
        forth in section 2(a)(4) of the Securities Act of 1933 (15 
        U.S.C. 77b(a)(4)).
            (6) Person associated with an accountant.--The term 
        ``person associated with an accountant'' means any partner, 
        officer, director, or manager of such accountant (or any person 
        occupying a similar status or performing similar functions), 
        any person directly or indirectly controlling, controlled by, 
        or under common control with such accountant, or any employee 
        of such accountant who performs a supervisory role in the 
        auditing process.
            (7) Recognized public regulatory organization.--The term 
        ``recognized public regulatory organization'' means a public 
        regulatory organization that the Commission has recognized as 
        meeting the criteria established by the Commission under 
        subsection (b) of section 2.
            (8) Securities laws.--The term ``securities laws'' means 
        the Securities Act of 1933 (15 U.S.C. 77a et seq.), the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), the 
        Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), the 
        Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), the 
        Investment Advisers Act of 1940 (15 U.S.C. 80b et seq.), and 
        the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa 
        et seq.), notwithstanding any contrary provision of any such 
        Act.
                                 <all>