[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 1731 Introduced in Senate (IS)]
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116th CONGRESS
1st Session
S. 1731
To amend the Sarbanes-Oxley Act of 2002 to require the Public Company
Accounting Oversight Board to maintain a list of certain foreign
issuers, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 5, 2019
Mr. Rubio (for himself, Mr. Menendez, Mr. Cotton, and Mrs. Gillibrand)
introduced the following bill; which was read twice and referred to the
Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To amend the Sarbanes-Oxley Act of 2002 to require the Public Company
Accounting Oversight Board to maintain a list of certain foreign
issuers, 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 ``Ensuring Quality Information and
Transparency for Abroad-Based Listings on our Exchanges Act'' or the
``EQUITABLE Act''.
SEC. 2. DEFINITIONS.
In this Act--
(1) the term ``applicable foreign issuer'' means a foreign
issuer--
(A) that is required to file a covered form; and
(B) for which, during the period covered by the
filing described in subparagraph (A), a covered foreign
public accounting firm has prepared an audit report for
the issuer;
(2) the term ``audit report'' has the meaning given the
term in section 2(a) of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7201(a));
(3) the term ``Board'' means the Public Company Accounting
Oversight Board;
(4) the term ``Commission'' means the Securities and
Exchange Commission;
(5) the term ``covered foreign public accounting firm''
means a foreign public accounting firm that the Board is unable
to inspect or investigate under the Sarbanes-Oxley Act of 2002
(15 U.S.C. 7201 et seq.) because of a position taken by an
authority outside of the United States;
(6) the term ``covered form''--
(A) means--
(i) the form described in section 249.310
of title 17, Code of Federal Regulations, or
any successor regulation; and
(ii) the form described in section 249.220f
of title 17, Code of Federal Regulations, or
any successor regulation; and
(B) includes a form that--
(i) is the equivalent of, or substantially
similar to, the form described in clause (i) or
(ii) of subparagraph (A); and
(ii) a foreign issuer files with the
Commission under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) or rules issued
under that Act;
(7) the term ``covered jurisdiction'' means the foreign
jurisdiction in which the position described in paragraph (5)
is taken with respect to a covered foreign public accounting
firm that prepares an audit report for an applicable foreign
issuer;
(8) the term ``exchange'' has the meaning given the term in
section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78a(a));
(9) the term ``foreign issuer'' has the meaning given the
term in section 240.3b-4 of title 17, Code of Federal
Regulations, or any successor regulation;
(10) the term ``foreign public accounting firm'' has the
meaning given the term in section 106(g) of the Sarbanes-Oxley
Act of 2002 (15 U.S.C. 7216(g));
(11) the term ``national securities exchange'' means an
exchange that is registered with the Commission under section 6
of the Securities Exchange Act of 1934 (15 U.S.C. 78f); and
(12) the term ``public accounting firm'' has the meaning
given the term in section 2(a) of the Sarbanes-Oxley Act of
2002 (15 U.S.C. 7201(a)).
SEC. 3. DISCLOSURE.
(a) List of Certain Foreign Issuers and Covered Foreign Public
Accounting Firms.--
(1) In general.--The Commission shall maintain a publicly
available list of--
(A) each foreign issuer, an audit report of which--
(i) is prepared by a foreign public
accounting firm; and
(ii) the Board is not able to inspect or
investigate because of a position taken by an
authority that is outside of the United States;
(B) each covered foreign public accounting firm
that has prepared an audit report identified under
subparagraph (A); and
(C) the jurisdiction in which each covered foreign
public accounting firm identified under subparagraph
(B) is organized or operating.
(2) Role of the board.--Not less frequently than annually,
the Board shall provide to the Commission the information that
is required for the Commission to carry out paragraph (1).
(b) Annual Report Disclosure.--
(1) Disclosure.--Each applicable foreign issuer shall
disclose in each covered form filed by the applicable foreign
issuer--
(A) that, during the period covered by covered
form, a covered foreign public accounting firm has
prepared an audit report for the issuer;
(B) the percentage of the shares of the issuer
owned by governmental entities in the foreign
jurisdiction in which the issuer is incorporated or
otherwise organized;
(C) whether governmental entities in a covered
jurisdiction with respect to any covered foreign public
accounting firm that has prepared an audit report for
the issuer during the period covered by the form have a
controlling financial interest with respect to the
issuer; and
(D) the name of any official of the Chinese
Communist Party who is a member of the board of
directors of the issuer or the operating entity with
respect to the issuer.
(2) Update of rules.--Not later than 270 days after the
date of enactment of this Act, and after providing the
opportunity for public notice and comment, the Commission shall
make any amendments to the rules of the Commission that are
required as a result of the requirements of this subsection.
(3) Effective date.--This subsection shall take effect on
the date on which the Commission completes the amendments
required under paragraph (2).
(c) Disclosure by Brokers and Dealers.--Section 15(n) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(n)) is amended--
(1) in paragraph (1), by striking ``Commission may issue''
and all that follows through the period at the end and
inserting the following: ``Commission--
``(A) shall issue rules that require a broker and a
dealer to disclose, with respect to any advice,
analysis, or report of the broker or dealer to a retail
investor regarding the securities of a foreign issuer,
whether a covered foreign public accounting firm has
prepared an audit report for the foreign issuer; and
``(B) in addition to the rules required under
subparagraph (A), may issue rules designating documents
or information that shall be provided by a broker or
dealer to a retail investor before the purchase of an
investment product or service by the retail
investor.''; and
(2) by adding at the end the following:
``(4) Definitions.--In this subsection, the terms `audit
report', `covered foreign public accounting firm', and `foreign
issuer' have the meanings given the terms in section 2 of the
EQUITABLE Act.''.
SEC. 4. PROHIBITION AGAINST THE LISTING OF CERTAIN FIRMS ON NATIONAL
SECURITIES EXCHANGES.
(a) In General.--Section 6(b) of the Securities Exchange Act of
1934 (15 U.S.C. 78f(b)) is amended by adding at the end the following:
``(11)(A) The rules of the exchange prohibit the initial
listing, after the date of enactment of this paragraph, of any
security of an issuer for which a covered foreign public
accounting firm has prepared an audit report.
``(B) Nothing in subparagraph (A) may be construed to
prevent an exchange from listing a security on the exchange on
or after the date of enactment of this paragraph if that
security was listed on the exchange or a national securities
exchange before the date of enactment of this paragraph.
``(C) In this paragraph, the terms `audit report' and
`covered foreign public accounting firm' have the meanings
given the terms in section 2 of the EQUITABLE Act.
``(12)(A) The rules of the exchange prohibit the listing of
any security of a foreign issuer that, beginning in 2025, has
been identified under section 3(a)(1)(A) of the EQUITABLE Act
in 3 consecutive years.
``(B) Nothing in subparagraph (A) may be construed to
prevent an exchange from listing a security of a foreign issuer
described in that subparagraph beginning on the date on which
the issuer submits to the Commission an audit report for the
issuer that is prepared by a registered public accounting firm
that the Public Company Accounting Oversight Board has
inspected, or is able to inspect, under section 104 of the
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214).
``(C) In this paragraph--
``(i) the terms `audit report' and `registered
public accounting firm' have the meanings given the
terms in section 2(a) of the Sarbanes-Oxley Act of 2002
(15 U.S.C. 7201(a)); and
``(ii) the terms `covered foreign public accounting
firm' and `foreign issuer' have the meanings given the
terms in section 2 of the EQUITABLE Act.''.
(b) Rules.--
(1) Proposals.--Not later than 90 days after the date of
enactment of this Act, each national securities exchange shall,
in accordance with section 19(b) of the Securities Exchange Act
of 1934 (15 U.S.C. 78s(b)) and any rules prescribed by the
Commission under that section, file with the Commission any
proposed change to the rules of the exchange that is required
as a result of the amendments made by this section.
(2) Adoption.--Not later than 1 year after the date of
enactment of this Act, each national securities exchange shall
have each proposed change described in paragraph (1) approved
by the Commission.
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