[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4083 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4083

 To provide for enhanced corporate responsibility under the securities 
                                 laws.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 9, 2002

 Mr. LaFalce (for himself, Mr. Frank, Mr. Kanjorski, Mr. Sanders, Mrs. 
Maloney of New York, Mr. Gutierrez, Ms. Schakowsky, Mrs. Jones of Ohio, 
     Mr. Clay, Mr. Dingell, Ms. DeLauro, and Mr. George Miller of 
 California) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To provide for enhanced corporate responsibility under the securities 
                                 laws.

    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 Responsibility Act of 
2002''.

SEC. 2. DISGORGEMENT REQUIRED.

    (a) Administrative Actions.--Within 30 days after the date of 
enactment of this Act, the Securities and Exchange Commission shall 
prescribe regulations to require disgorgement, in a proceeding pursuant 
to its authority under section 21A, 21B, or 21C (15 U.S.C. 78u-1, 78u-
2, 78u-3), of salaries, commissions, fees, bonuses, options, profits 
from securities transactions, and losses avoided through securities 
transactions obtained by an officer or director of an issuer during or 
for a fiscal year or other reporting period if such officer or director 
engaged in misconduct resulting in, or made or caused to be made in, 
the filing of a financial statement for such fiscal year or reporting 
period which--
            (1) was at the time, and in the light of the circumstances 
        under which it was made, false or misleading with respect to 
        any material fact; or
            (2) omitted to state a material fact necessary in order to 
        make the statements made, in the light of the circumstances in 
        which they were made, not misleading,
    (b) Judicial Proceedings.--Section 21(d) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78u) is amended by adding at the end the 
following new paragraph:
    ``(5) Additional disgorgement authority.--In any action or 
proceeding brought or instituted by the Commission under the securities 
laws against any person--
            ``(A) for engaging in misconduct resulting in, or making or 
        causing to be made in, the filing of a financial statement 
        which--
                    ``(i) was at the time, and in the light of the 
                circumstances under which it was made, false or 
                misleading with respect to any material fact; or
                    ``(ii) omitted to state a material fact necessary 
                in order to make the statements made, in the light of 
                the circumstances in which they were made, not 
                misleading; or
            ``(B) for engaging in, causing, or aiding and abetting any 
        other violation of the securities laws or the rules and 
        regulations thereunder,
such person, in addition to being subject to any other appropriate 
order, may be required to disgorge any or all benefits received from 
any source in connection with the conduct constituting, causing, or 
aiding and abetting the violation, including (but not limited to) 
salary, commissions, fees, bonuses, options, profits from securities 
transactions, and losses avoided through securities transactions.''.

SEC. 3. CEO AND CFO ACCOUNTABILITY FOR DISCLOSURE.

    (a) Regulations Required.--The Securities and Exchange Commission 
shall by rule require, for each company filing periodic reports under 
section 13 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) Deadline.--The rules required by subsection (a) shall be 
effective not later than 30 days after the date of enactment of this 
Act.

SEC. 4. REMOVAL OF UNFIT CORPORATE OFFICERS.

    (a) Removal in Judicial Proceedings.--
            (1) 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''.
            (2) 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''.
    (b) Removal in Administrative Proceedings.--
            (1) 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 
        the following new subsection:
    ``(f) Authority 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) of this title 
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 person's conduct demonstrates unfitness to 
serve as an officer or director of any such issuer.''.
            (2) 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 new subsection:
    ``(f) Authority 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) of this title 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 this title or that is required to file 
reports pursuant to section 15(d) of this title if the person's conduct 
demonstrates unfitness to serve as an officer or director of any such 
issuer.''.
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