[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2724 Introduced in Senate (IS)]

<DOC>






116th CONGRESS
  1st Session
                                S. 2724

   To amend the Sarbanes-Oxley Act of 2002 to exclude the audits of 
   privately held, non-custody brokers and dealers that are in good 
 standing from certain requirements under title I of that Act, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 29, 2019

    Mr. Cotton (for himself, Ms. Sinema, Mr. Tillis, and Mr. Jones) 
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 exclude the audits of 
   privately held, non-custody brokers and dealers that are in good 
 standing from certain requirements under title I of that Act, 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 ``Small Business Audit Correction Act 
of 2019''.

SEC. 2. EXEMPTION.

    (a) Amendments to the Sarbanes-Oxley Act of 2002.--Section 110 of 
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7220) is amended--
            (1) in paragraph (3), by inserting ``, except that the term 
        does not include a non-custody broker or dealer that is 
        privately held and in good standing'' after ``registered public 
        accounting firm'';
            (2) in paragraph (4), by inserting ``, except that the term 
        does not include a non-custody broker or dealer that is 
        privately held and in good standing'' after ``registered public 
        accounting firm'';
            (3) by redesignating paragraphs (5) and (6) as paragraphs 
        (8) and (9), respectively; and
            (4) by inserting after paragraph (4) the following:
            ``(5) In good standing.--The term `in good standing' means, 
        with respect to a broker or dealer (as those terms are defined 
        in section 3(a) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a))), that, as of the last day of the most recently 
        completed fiscal year of the broker or dealer, as applicable, 
        the broker or dealer--
                    ``(A) is registered with the Commission;
                    ``(B) is a member of an association that is 
                registered as a national securities association under 
                section 15A of the Securities Exchange Act of 1934 (15 
                U.S.C. 78o-3);
                    ``(C) is compliant with the minimum dollar net 
                capital requirements under section 240.15c3-1 of title 
                17, Code of Federal Regulations, or any successor 
                regulation;
                    ``(D) has not, during the 10-year period preceding 
                that date, been convicted of a felony under Federal or 
                State law;
                    ``(E) does not have a person associated with the 
                broker or dealer, as defined in section 3(a) of the 
                Securities Exchange Act of 1934 (15 U.S.C. 78c(a)), 
                that, during the 10-year period preceding that date, 
                has been convicted of a felony for fraudulent conduct 
                under Federal or State law; and
                    ``(F) is not subject to statutory disqualification 
                by reason of being--
                            ``(i) expelled or suspended from--
                                    ``(I) an association that is 
                                registered as described in subparagraph 
                                (B); or
                                    ``(II) an association that is 
                                registered as a registered futures 
                                association under section 17 of the 
                                Commodity Exchange Act (7 U.S.C. 21);
                            ``(ii) subject to an order of the 
                        Commission, other appropriate regulatory 
                        agency, or foreign financial regulatory 
                        authority denying, suspending, or revoking the 
                        registration of the broker or dealer as a 
                        regulated entity;
                            ``(iii) subject to an order of the 
                        Commodity Futures Trading Commission, or other 
                        appropriate regulatory entity, denying, 
                        suspending, or revoking the registration of the 
                        broker or dealer under the Commodity Exchange 
                        Act (7 U.S.C. 1 et seq.) or the authority of 
                        the broker or dealer to engage in any 
                        transaction; or
                            ``(iv) subject to a restraining order 
                        entered by a court.
            ``(6) Non-custody broker or dealer.--The term `non-custody 
        broker or dealer' means a broker or dealer (as those terms are 
        defined in section 3(a) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a))), as applicable, that--
                    ``(A) as of the last day of the most recently 
                completed fiscal year of the broker or dealer--
                            ``(i) has not less than one and not more 
                        than 150 persons registered with an association 
                        that is registered as a national securities 
                        association under section 15A of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78o-3);
                            ``(ii) is not a high frequency trading 
                        broker or dealer, as that term is defined by 
                        the Commission with respect to a particular 
                        registered firm type; and
                            ``(iii) is not affiliated with an 
                        investment advisor that--
                                    ``(I) is registered with the 
                                Commission or a State entity; and
                                    ``(II) acts as the custodian for 
                                customer assets;
                    ``(B) with respect to the average of the three most 
                recently completed fiscal years of the broker or 
                dealer, has gross revenue that enables the broker or 
                dealer to qualify as a small business concern for the 
                purposes of a program administered by the Small 
                Business Administration; and
                    ``(C) throughout the most recently completed fiscal 
                year of the broker or dealer--
                            ``(i) does not, as a matter of ordinary 
                        business practice in connection with the 
                        activities of the broker or dealer, receive 
                        customer checks, drafts, or other evidence of 
                        indebtedness made payable to the broker or 
                        dealer;
                            ``(ii) if required under section 3(a)(2) of 
                        the Securities Investor Protection Act of 1970 
                        (15 U.S.C. 78ccc(a)(2)), is a member of the 
                        Securities Investor Protection Corporation; and
                            ``(iii) either--
                                    ``(I) if the broker or dealer is 
                                subject to section 240.15c3-3 of title 
                                17, Code of Federal Regulations, or any 
                                successor regulation, is in compliance 
                                with that section; or
                                    ``(II) is not subject to such 
                                section 240.15c3-3, or any successor 
                                regulation, because the broker or 
                                dealer does not maintain custody over 
                                any customer securities or cash.
            ``(7) Privately held.--The term `privately held' means, 
        with respect to a broker or dealer (as those terms are defined 
        in section 3(a) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a))), that the broker or dealer, as applicable, is 
        not an issuer.''.
    (b) Amendments to Regulations.--
            (1) Definitions.--In this subsection, the terms ``in good 
        standing'', ``non-custody broker or dealer'', and ``privately 
        held'' have the meanings given the terms in section 110 of the 
        Sarbanes-Oxley Act of 2002 (15 U.S.C. 7220), as amended by 
        subsection (a).
            (2) Amendments.--Not later than 180 days after the date of 
        enactment of this Act, the Securities and Exchange Commission 
        shall make any necessary amendments to regulations of the 
        Commission that are in effect as of the date of enactment of 
        this Act in order to--
                    (A) carry out this Act and the amendments made by 
                this Act; and
                    (B) exclude the auditors of non-custody brokers or 
                dealers that are privately held and in good standing 
                from the audit requirements of the Public Company 
                Accounting Oversight Board.
    (c) Effective Date.--This Act, and the amendments made by this Act, 
shall take effect on the date that is 180 days after the date of 
enactment of this Act.
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