110 HR 1049 IH: Amend Misinterpreted Excessive Regulation In Corporate America Act U.S. House of Representatives 2007-02-14 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 110th CONGRESS 1st Session H. R. 1049 IN THE HOUSE OF REPRESENTATIVES February 14, 2007 Mr. Garrett of New Jersey (for himself, Mr. Hensarling, Mr. Feeney, Mr. Price of Georgia, Mr. Paul, Mr. Gingrey, Mr. Westmoreland, Mr. Carter, Mr. Goode, Mrs. Myrick, Mr. Gohmert, Mr. Lamborn, Mr. Flake, Mr. Akin, Mr. Royce, and Mr. Neugebauer) introduced the following bill; which was referred to the Committee on Financial Services A BILL To reduce the unintended costs and burdens that the Sarbanes-Oxley Act of 2002 imposes on United States businesses, while maintaining that Act’s goals of bolstering confidence in the integrity of publicly held companies.

1.

Short title

This Act may be cited as the Amend Misinterpreted Excessive Regulation In Corporate America Act.

2.

Findings

Congress finds the following: (1)The stated intent of the Sarbanes-Oxley Act of 2002 was to restore confidence and integrity in our nation’s financial markets through increased transparency and accountability. (2)The regulatory interpretation of section 404 of that Act has led to many unintended consequences, such as— (A)diverting valuable resources away from other legitimate business needs; (B)creating massive and tedious documentation requirements; and (C)discouraging the public listing of both international and domestic companies on United States markets. (3)Nine out of ten complaints about the Sarbanes-Oxley Act of 2002 are related to section 404. (4)Ninety percent of international small companies have listed in international markets and not in the United States markets. (5)The out-of-pocket costs have been $4 million to $6 million per accelerated filer, more than 50 times original Securities and Exchange Commission estimates. (6)Total economic costs including opportunity costs and social implications are up to $1.4 trillion.

3.

Creation of Ombudsman for the PCAOB

Title I of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7211 et seq.) is amended by adding at the end the following new section:

110.

Ombudsman

(a)

Establishment required

Not later than 180 days after the date of enactment of the Amend Misinterpreted Excessive Regulation In Corporate America Act, the Board shall appoint an ombudsman for the Board. The Ombudsman shall report directly to the Chairman. (b)

Duties of ombudsman

The ombudsman appointed in accordance with subsection (a) for the Board shall— (1)act as a liaison between the Board and— (A) any registered public accounting firm or issuer with respect to issues or disputes concerning the preparation or issuance of any audit report with respect to that issuer; and (B)any affected registered public accounting firm or issuer with respect to— (i)any problem such firm or issuer may have in dealing with the Board resulting from the regulatory activities of the Board, particularly with regard to the implementation of section 404; and (ii)issues caused by the relationships of registered public accounting firms and issuers generally; and (2)assure that safeguards exist to encourage complainants to come forward and to preserve confidentiality; and (3)carry out such activities, and any other activities assigned by the Board, in accordance with guidelines prescribed by the Board.

.

4.

Reorganization of the Board of the PCAOB

(a)

Appointment to the Board

(1)

Amendment

Subparagraph (A) of section 101(e)(4) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7211(e)(4)(B)) is amended to read as follows: (A)

Presidential appointment

The members of the Board shall be appointed by the President, by and with the advice and consent of the Senate.. (2)

Transition

The members of the Public Company Accounting Oversight Board serving on the date of enactment of this Act may continue to serve until a successor is appointed pursuant to the amendment made by paragraph (1) of this subsection. The term of office of any such successor shall expire at the time of the expiration of the term of his or her predecessor, as designated by the President at the time of the appointment. (3)

Compensation

Section 5312 of title 5, United States Code, is amended by adding at the end the following: Chairman and Members, Public Company Accounting Oversight Board.. (4)

Conforming Amendments

(A)Sections 101(e) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7211(e)) is amended by striking paragraph (6). (B)Section 107(d) of such Act (15 U.S.C. 7217(d)) is amended by striking paragraph (3). (b)

Funding

Section 109(f) of such Act is amended by adding at the end the following new sentence: The Congress reserves the authority to establish annual or other periodic limits upon the amount of fees which may be collected under this section on behalf of the Board..

5.

Reductions of internal control implementation costs

(a)

Revisions required

Not later than December 31, 2007— (1)the Securities and Exchange Commission shall adopt revisions to its rules under section 404(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7211(a)) relating to management’s assessment of an issuer’s internal control structure and procedures; and (2)the Public Company Accounting Oversight Board shall adopt revisions to its standards under section 404(b) of such Act for auditor attestation to and reporting on such management assessment. (b)

Cost of Implementation Reduction

In adopting the revisions required by subsection (a), the Commission and the Board shall reduce the costs of the implementation of section 404, consistent with the intention of the Congress that such section not increase significantly the cost of the annual audits of financial statements under section 13(a) and 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)). (c)

Risk-based implementation

In adopting the revisions required by subsection (a), the Commission shall adopt a more risk-based statement on internal control reporting that focuses internal control review on financial controls having significant risk of failing to prevent financial damages that would be material to the financial statements of the issuer.

6.

Separate engagements for internal control evaluations

Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)) is amended— (1)by inserting before the period at the end of the first sentence the following: , or the issuer shall separately engage a different registered public accounting firm which shall attest to and report on such assessment; and (2)by striking the last sentence.

7.

Private rights of action

Section 404 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262) is amended by adding at the end the following new subsection: (c)

No private rights of action

No private right of action may be brought against any registered public accounting firm in any Federal or State court on the basis of a violation or alleged violation of the requirements of this section or standards issued by the Board under or for purposes of implementing this section..