[Congressional Record (Bound Edition), Volume 148 (2002), Part 10]
[House]
[Pages 14364-14383]
[From the U.S. Government Publishing Office, www.gpo.gov]




       CONFERENCE REPORT ON H.R. 3763, SARBANES-OXLEY ACT OF 2002

       Mr. OXLEY submitted the following conference report and 
     statement on the bill (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:

                  Conference Report (H. Rept. 107-610)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to the bill (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, having met, after 
     full

[[Page 14365]]

     and free conference, have agreed to recommend and do 
     recommend to their respective Houses as follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Sarbanes-
     Oxley Act of 2002''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Commission rules and enforcement.

           TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

Sec. 101. Establishment; administrative provisions.
Sec. 102. Registration with the Board.
Sec. 103. Auditing, quality control, and independence standards and 
              rules.
Sec. 104. Inspections of registered public accounting firms.
Sec. 105. Investigations and disciplinary proceedings.
Sec. 106. Foreign public accounting firms.
Sec. 107. Commission oversight of the Board.
Sec. 108. Accounting standards.
Sec. 109. Funding.

                     TITLE II--AUDITOR INDEPENDENCE

Sec. 201. Services outside the scope of practice of auditors.
Sec. 202. Preapproval requirements.
Sec. 203. Audit partner rotation.
Sec. 204. Auditor reports to audit committees.
Sec. 205. Conforming amendments.
Sec. 206. Conflicts of interest.
Sec. 207. Study of mandatory rotation of registered public accounting 
              firms.
Sec. 208. Commission authority.
Sec. 209. Considerations by appropriate State regulatory authorities.

                  TITLE III--CORPORATE RESPONSIBILITY

Sec. 301. Public company audit committees.
Sec. 302. Corporate responsibility for financial reports.
Sec. 303. Improper influence on conduct of audits.
Sec. 304. Forfeiture of certain bonuses and profits.
Sec. 305. Officer and director bars and penalties.
Sec. 306. Insider trades during pension fund blackout periods.
Sec. 307. Rules of professional responsibility for attorneys.
Sec. 308. Fair funds for investors.

                TITLE IV--ENHANCED FINANCIAL DISCLOSURES

Sec. 401. Disclosures in periodic reports.
Sec. 402. Enhanced conflict of interest provisions.
Sec. 403. Disclosures of transactions involving management and 
              principal stockholders.
Sec. 404. Management assessment of internal controls.
Sec. 405. Exemption.
Sec. 406. Code of ethics for senior financial officers.
Sec. 407. Disclosure of audit committee financial expert.
Sec. 408. Enhanced review of periodic disclosures by issuers.
Sec. 409. Real time issuer disclosures.

                 TITLE V--ANALYST CONFLICTS OF INTEREST

Sec. 501. Treatment of securities analysts by registered securities 
              associations and national securities exchanges.

              TITLE VI--COMMISSION RESOURCES AND AUTHORITY

Sec. 601. Authorization of appropriations.
Sec. 602. Appearance and practice before the Commission.
Sec. 603. Federal court authority to impose penny stock bars.
Sec. 604. Qualifications of associated persons of brokers and dealers.

                     TITLE VII--STUDIES AND REPORTS

Sec. 701. GAO study and report regarding consolidation of public 
              accounting firms.
Sec. 702. Commission study and report regarding credit rating agencies.
Sec. 703. Study and report on violators and violations
Sec. 704. Study of enforcement actions.
Sec. 705. Study of investment banks.

        TITLE VIII--CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY

Sec. 801. Short title.
Sec. 802. Criminal penalties for altering documents.
Sec. 803. Debts nondischargeable if incurred in violation of securities 
              fraud laws.
Sec. 804. Statute of limitations for securities fraud.
Sec. 805. Review of Federal Sentencing Guidelines for obstruction of 
              justice and extensive criminal fraud.
Sec. 806. Protection for employees of publicly traded companies who 
              provide evidence of fraud.
Sec. 807. Criminal penalties for defrauding shareholders of publicly 
              traded companies.

           TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

Sec. 901. Short title.
Sec. 902. Attempts and conspiracies to commit criminal fraud offenses.
Sec. 903. Criminal penalties for mail and wire fraud.
Sec. 904. Criminal penalties for violations of the Employee Retirement 
              Income Security Act of 1974.
Sec. 905. Amendment to sentencing guidelines relating to certain white-
              collar offenses.
Sec. 906. Corporate responsibility for financial reports.

                     TITLE X--CORPORATE TAX RETURNS

Sec. 1001. Sense of the Senate regarding the signing of corporate tax 
              returns by chief executive officers.

              TITLE XI--CORPORATE FRAUD AND ACCOUNTABILITY

Sec. 1101. Short title.
Sec. 1102. Tampering with a record or otherwise impeding an official 
              proceeding.
Sec. 1103. Temporary freeze authority for the Securities and Exchange 
              Commission.
Sec. 1104. Amendment to the Federal Sentencing Guidelines.
Sec. 1105. Authority of the Commission to prohibit persons from serving 
              as officers or directors.
Sec. 1106. Increased criminal penalties under Securities Exchange Act 
              of 1934.
Sec. 1107. Retaliation against informants.

     SEC. 2. DEFINITIONS.

       (a) In General.--In this Act, the following definitions 
     shall apply:
       (1) Appropriate state regulatory authority.--The term 
     ``appropriate State regulatory authority'' means the State 
     agency or other authority responsible for the licensure or 
     other regulation of the practice of accounting in the State 
     or States having jurisdiction over a registered public 
     accounting firm or associated person thereof, with respect to 
     the matter in question.
       (2) Audit.--The term ``audit'' means an examination of the 
     financial statements of any issuer by an independent public 
     accounting firm in accordance with the rules of the Board or 
     the Commission (or, for the period preceding the adoption of 
     applicable rules of the Board under section 103, in 
     accordance with then-applicable generally accepted auditing 
     and related standards for such purposes), for the purpose of 
     expressing an opinion on such statements.
       (3) Audit committee.--The term ``audit committee'' means--
       (A) a committee (or equivalent body) established by and 
     amongst the board of directors of an issuer for the purpose 
     of overseeing the accounting and financial reporting 
     processes of the issuer and audits of the financial 
     statements of the issuer; and
       (B) if no such committee exists with respect to an issuer, 
     the entire board of directors of the issuer.
       (4) Audit report.--The term ``audit report'' means a 
     document or other record--
       (A) prepared following an audit performed for purposes of 
     compliance by an issuer with the requirements of the 
     securities laws; and
       (B) in which a public accounting firm either--
       (i) sets forth the opinion of that firm regarding a 
     financial statement, report, or other document; or
       (ii) asserts that no such opinion can be expressed.
       (5) Board.--The term ``Board'' means the Public Company 
     Accounting Oversight Board established under section 101.
       (6) Commission.--The term ``Commission'' means the 
     Securities and Exchange Commission.
       (7) Issuer.--The term ``issuer'' means an issuer (as 
     defined in section 3 of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c)), the securities of which are registered 
     under section 12 of that Act (15 U.S.C. 78l), or that is 
     required to file reports under section 15(d) (15 U.S.C. 
     78o(d)), or that files or has filed a registration statement 
     that has not yet become effective under the Securities Act of 
     1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn.
       (8) Non-audit services.--The term ``non-audit services'' 
     means any professional services provided to an issuer by a 
     registered public accounting firm, other than those provided 
     to an issuer in connection with an audit or a review of the 
     financial statements of an issuer.
       (9) Person associated with a public accounting firm.--
       (A) In general.--The terms ``person associated with a 
     public accounting firm'' (or with a ``registered public 
     accounting firm'') and ``associated person of a public 
     accounting firm'' (or of a ``registered public accounting 
     firm'') mean any individual proprietor, partner, shareholder, 
     principal, accountant, or other professional employee of a 
     public accounting firm, or any other independent contractor 
     or entity that, in connection with the preparation or 
     issuance of any audit report--
       (i) shares in the profits of, or receives compensation in 
     any other form from, that firm; or
       (ii) participates as agent or otherwise on behalf of such 
     accounting firm in any activity of that firm.
       (B) Exemption authority.--The Board may, by rule, exempt 
     persons engaged only in ministerial tasks from the definition 
     in subparagraph (A), to the extent that the Board determines 
     that any such exemption is consistent with the purposes of 
     this Act, the public interest, or the protection of 
     investors.
       (10) Professional standards.--The term ``professional 
     standards'' means--
       (A) accounting principles that are--

[[Page 14366]]

       (i) established by the standard setting body described in 
     section 19(b) of the Securities Act of 1933, as amended by 
     this Act, or prescribed by the Commission under section 19(a) 
     of that Act (15 U.S.C. 17a(s)) or section 13(b) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78a(m)); and
       (ii) relevant to audit reports for particular issuers, or 
     dealt with in the quality control system of a particular 
     registered public accounting firm; and
       (B) auditing standards, standards for attestation 
     engagements, quality control policies and procedures, ethical 
     and competency standards, and independence standards 
     (including rules implementing title II) that the Board or the 
     Commission determines--
       (i) relate to the preparation or issuance of audit reports 
     for issuers; and
       (ii) are established or adopted by the Board under section 
     103(a), or are promulgated as rules of the Commission.
       (11) Public accounting firm.--The term ``public accounting 
     firm'' means--
       (A) a proprietorship, partnership, incorporated 
     association, corporation, limited liability company, limited 
     liability partnership, or other legal entity that is engaged 
     in the practice of public accounting or preparing or issuing 
     audit reports; and
       (B) to the extent so designated by the rules of the Board, 
     any associated person of any entity described in subparagraph 
     (A).
       (12) Registered public accounting firm.--The term 
     ``registered public accounting firm'' means a public 
     accounting firm registered with the Board in accordance with 
     this Act.
       (13) Rules of the board.--The term ``rules of the Board'' 
     means the bylaws and rules of the Board (as submitted to, and 
     approved, modified, or amended by the Commission, in 
     accordance with section 107), and those stated policies, 
     practices, and interpretations of the Board that the 
     Commission, by rule, may deem to be rules of the Board, as 
     necessary or appropriate in the public interest or for the 
     protection of investors.
       (14) Security.--The term ``security'' has the same meaning 
     as in section 3(a) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)).
       (15) Securities laws.--The term ``securities laws'' means 
     the provisions of law referred to in section 3(a)(47) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), as 
     amended by this Act, and includes the rules, regulations, and 
     orders issued by the Commission thereunder.
       (16) State.--The term ``State'' means any State of the 
     United States, the District of Columbia, Puerto Rico, the 
     Virgin Islands, or any other territory or possession of the 
     United States.
       (b) Conforming Amendment.--Section 3(a)(47) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) is 
     amended by inserting ``the Sarbanes-Oxley Act of 2002,'' 
     before ``the Public''.

     SEC. 3. COMMISSION RULES AND ENFORCEMENT.

       (a) Regulatory Action.--The Commission shall promulgate 
     such rules and regulations, as may be necessary or 
     appropriate in the public interest or for the protection of 
     investors, and in furtherance of this Act.
       (b) Enforcement.--
       (1) In general.--A violation by any person of this Act, any 
     rule or regulation of the Commission issued under this Act, 
     or any rule of the Board shall be treated for all purposes in 
     the same manner as a violation of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78a et seq.) or the rules and regulations 
     issued thereunder, consistent with the provisions of this 
     Act, and any such person shall be subject to the same 
     penalties, and to the same extent, as for a violation of that 
     Act or such rules or regulations.
       (2) Investigations, injunctions, and prosecution of 
     offenses.--Section 21 of the Securities Exchange Act of 1934 
     (15 U.S.C. 78u) is amended--
       (A) in subsection (a)(1), by inserting ``the rules of the 
     Public Company Accounting Oversight Board, of which such 
     person is a registered public accounting firm or a person 
     associated with such a firm,'' after ``is a participant,'';
       (B) in subsection (d)(1), by inserting ``the rules of the 
     Public Company Accounting Oversight Board, of which such 
     person is a registered public accounting firm or a person 
     associated with such a firm,'' after ``is a participant,'';
       (C) in subsection (e), by inserting ``the rules of the 
     Public Company Accounting Oversight Board, of which such 
     person is a registered public accounting firm or a person 
     associated with such a firm,'' after ``is a participant,''; 
     and
       (D) in subsection (f), by inserting ``or the Public Company 
     Accounting Oversight Board'' after ``self-regulatory 
     organization'' each place that term appears.
       (3) Cease-and-desist proceedings.--Section 21C(c)(2) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is 
     amended by inserting ``registered public accounting firm (as 
     defined in section 2 of the Sarbanes-Oxley Act of 2002),'' 
     after ``government securities dealer,''.
       (4) Enforcement by federal banking agencies.--Section 12(i) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78l(i)) is 
     amended by--
       (A) striking ``sections 12,'' each place it appears and 
     inserting ``sections 10A(m), 12,''; and
       (B) striking ``and 16,'' each place it appears and 
     inserting ``and 16 of this Act, and sections 302, 303, 304, 
     306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 
     2002,''.
       (c) Effect on Commission Authority.--Nothing in this Act or 
     the rules of the Board shall be construed to impair or 
     limit--
       (1) the authority of the Commission to regulate the 
     accounting profession, accounting firms, or persons 
     associated with such firms for purposes of enforcement of the 
     securities laws;
       (2) the authority of the Commission to set standards for 
     accounting or auditing practices or auditor independence, 
     derived from other provisions of the securities laws or the 
     rules or regulations thereunder, for purposes of the 
     preparation and issuance of any audit report, or otherwise 
     under applicable law; or
       (3) the ability of the Commission to take, on the 
     initiative of the Commission, legal, administrative, or 
     disciplinary action against any registered public accounting 
     firm or any associated person thereof.
           TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

     SEC. 101. ESTABLISHMENT; ADMINISTRATIVE PROVISIONS.

       (a) Establishment of Board.--There is established the 
     Public Company Accounting Oversight Board, to oversee the 
     audit of public companies that are subject to the securities 
     laws, and related matters, in order to protect the interests 
     of investors and further the public interest in the 
     preparation of informative, accurate, and independent audit 
     reports for companies the securities of which are sold to, 
     and held by and for, public investors. The Board shall be a 
     body corporate, operate as a nonprofit corporation, and have 
     succession until dissolved by an Act of Congress.
       (b) Status.--The Board shall not be an agency or 
     establishment of the United States Government, and, except as 
     otherwise provided in this Act, shall be subject to, and have 
     all the powers conferred upon a nonprofit corporation by, the 
     District of Columbia Nonprofit Corporation Act. No member or 
     person employed by, or agent for, the Board shall be deemed 
     to be an officer or employee of or agent for the Federal 
     Government by reason of such service.
       (c) Duties of the Board.--The Board shall, subject to 
     action by the Commission under section 107, and once a 
     determination is made by the Commission under subsection (d) 
     of this section--
       (1) register public accounting firms that prepare audit 
     reports for issuers, in accordance with section 102;
       (2) establish or adopt, or both, by rule, auditing, quality 
     control, ethics, independence, and other standards relating 
     to the preparation of audit reports for issuers, in 
     accordance with section 103;
       (3) conduct inspections of registered public accounting 
     firms, in accordance with section 104 and the rules of the 
     Board;
       (4) conduct investigations and disciplinary proceedings 
     concerning, and impose appropriate sanctions where justified 
     upon, registered public accounting firms and associated 
     persons of such firms, in accordance with section 105;
       (5) perform such other duties or functions as the Board (or 
     the Commission, by rule or order) determines are necessary or 
     appropriate to promote high professional standards among, and 
     improve the quality of audit services offered by, registered 
     public accounting firms and associated persons thereof, or 
     otherwise to carry out this Act, in order to protect 
     investors, or to further the public interest;
       (6) enforce compliance with this Act, the rules of the 
     Board, professional standards, and the securities laws 
     relating to the preparation and issuance of audit reports and 
     the obligations and liabilities of accountants with respect 
     thereto, by registered public accounting firms and associated 
     persons thereof; and
       (7) set the budget and manage the operations of the Board 
     and the staff of the Board.
       (d) Commission Determination.--The members of the Board 
     shall take such action (including hiring of staff, proposal 
     of rules, and adoption of initial and transitional auditing 
     and other professional standards) as may be necessary or 
     appropriate to enable the Commission to determine, not later 
     than 270 days after the date of enactment of this Act, that 
     the Board is so organized and has the capacity to carry out 
     the requirements of this title, and to enforce compliance 
     with this title by registered public accounting firms and 
     associated persons thereof. The Commission shall be 
     responsible, prior to the appointment of the Board, for the 
     planning for the establishment and administrative transition 
     to the Board's operation.
       (e) Board Membership.--
       (1) Composition.--The Board shall have 5 members, appointed 
     from among prominent individuals of integrity and reputation 
     who have a demonstrated commitment to the interests of 
     investors and the public, and an understanding of the 
     responsibilities for and nature of the financial disclosures 
     required of issuers under the securities laws and the 
     obligations of accountants with respect to the preparation 
     and issuance of audit reports with respect to such 
     disclosures.
       (2) Limitation.--Two members, and only 2 members, of the 
     Board shall be or have been certified public accountants 
     pursuant to the laws of 1 or more States, provided that, if 1 
     of those 2 members is the chairperson, he or she may not have 
     been a practicing certified public accountant for at least 5 
     years prior to his or her appointment to the Board.
       (3) Full-time independent service.--Each member of the 
     Board shall serve on a full-time basis, and may not, 
     concurrent with service on the Board, be employed by any 
     other person or engage in any other professional or business 
     activity. No member of the Board may share in any of the 
     profits of, or receive payments from, a public accounting 
     firm (or any other person,

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     as determined by rule of the Commission), other than fixed 
     continuing payments, subject to such conditions as the 
     Commission may impose, under standard arrangements for the 
     retirement of members of public accounting firms.
       (4) Appointment of board members.--
       (A) Initial board.--Not later than 90 days after the date 
     of enactment of this Act, the Commission, after consultation 
     with the Chairman of the Board of Governors of the Federal 
     Reserve System and the Secretary of the Treasury, shall 
     appoint the chairperson and other initial members of the 
     Board, and shall designate a term of service for each.
       (B) Vacancies.--A vacancy on the Board shall not affect the 
     powers of the Board, but shall be filled in the same manner 
     as provided for appointments under this section.
       (5) Term of service.--
       (A) In general.--The term of service of each Board member 
     shall be 5 years, and until a successor is appointed, except 
     that--
       (i) the terms of office of the initial Board members (other 
     than the chairperson) shall expire in annual increments, 1 on 
     each of the first 4 anniversaries of the initial date of 
     appointment; and
       (ii) any Board member appointed to fill a vacancy occurring 
     before the expiration of the term for which the predecessor 
     was appointed shall be appointed only for the remainder of 
     that term.
       (B) Term limitation.--No person may serve as a member of 
     the Board, or as chairperson of the Board, for more than 2 
     terms, whether or not such terms of service are consecutive.
       (6) Removal from office.--A member of the Board may be 
     removed by the Commission from office, in accordance with 
     section 107(d)(3), for good cause shown before the expiration 
     of the term of that member.
       (f) Powers of the Board.--In addition to any authority 
     granted to the Board otherwise in this Act, the Board shall 
     have the power, subject to section 107--
       (1) to sue and be sued, complain and defend, in its 
     corporate name and through its own counsel, with the approval 
     of the Commission, in any Federal, State, or other court;
       (2) to conduct its operations and maintain offices, and to 
     exercise all other rights and powers authorized by this Act, 
     in any State, without regard to any qualification, licensing, 
     or other provision of law in effect in such State (or a 
     political subdivision thereof);
       (3) to lease, purchase, accept gifts or donations of or 
     otherwise acquire, improve, use, sell, exchange, or convey, 
     all of or an interest in any property, wherever situated;
       (4) to appoint such employees, accountants, attorneys, and 
     other agents as may be necessary or appropriate, and to 
     determine their qualifications, define their duties, and fix 
     their salaries or other compensation (at a level that is 
     comparable to private sector self-regulatory, accounting, 
     technical, supervisory, or other staff or management 
     positions);
       (5) to allocate, assess, and collect accounting support 
     fees established pursuant to section 109, for the Board, and 
     other fees and charges imposed under this title; and
       (6) to enter into contracts, execute instruments, incur 
     liabilities, and do any and all other acts and things 
     necessary, appropriate, or incidental to the conduct of its 
     operations and the exercise of its obligations, rights, and 
     powers imposed or granted by this title.
       (g) Rules of the Board.--The rules of the Board shall, 
     subject to the approval of the Commission--
       (1) provide for the operation and administration of the 
     Board, the exercise of its authority, and the performance of 
     its responsibilities under this Act;
       (2) permit, as the Board determines necessary or 
     appropriate, delegation by the Board of any of its functions 
     to an individual member or employee of the Board, or to a 
     division of the Board, including functions with respect to 
     hearing, determining, ordering, certifying, reporting, or 
     otherwise acting as to any matter, except that--
       (A) the Board shall retain a discretionary right to review 
     any action pursuant to any such delegated function, upon its 
     own motion;
       (B) a person shall be entitled to a review by the Board 
     with respect to any matter so delegated, and the decision of 
     the Board upon such review shall be deemed to be the action 
     of the Board for all purposes (including appeal or review 
     thereof); and
       (C) if the right to exercise a review described in 
     subparagraph (A) is declined, or if no such review is sought 
     within the time stated in the rules of the Board, then the 
     action taken by the holder of such delegation shall for all 
     purposes, including appeal or review thereof, be deemed to be 
     the action of the Board;
       (3) establish ethics rules and standards of conduct for 
     Board members and staff, including a bar on practice before 
     the Board (and the Commission, with respect to Board-related 
     matters) of 1 year for former members of the Board, and 
     appropriate periods (not to exceed 1 year) for former staff 
     of the Board; and
       (4) provide as otherwise required by this Act.
       (h) Annual Report to the Commission.--The Board shall 
     submit an annual report (including its audited financial 
     statements) to the Commission, and the Commission shall 
     transmit a copy of that report to the Committee on Banking, 
     Housing, and Urban Affairs of the Senate, and the Committee 
     on Financial Services of the House of Representatives, not 
     later than 30 days after the date of receipt of that report 
     by the Commission.

     SEC. 102. REGISTRATION WITH THE BOARD.

       (a) Mandatory Registration.--Beginning 180 days after the 
     date of the determination of the Commission under section 
     101(d), it shall be unlawful for any person that is not a 
     registered public accounting firm to prepare or issue, or to 
     participate in the preparation or issuance of, any audit 
     report with respect to any issuer.
       (b) Applications for Registration.--
       (1) Form of application.--A public accounting firm shall 
     use such form as the Board may prescribe, by rule, to apply 
     for registration under this section.
       (2) Contents of applications.--Each public accounting firm 
     shall submit, as part of its application for registration, in 
     such detail as the Board shall specify--
       (A) the names of all issuers for which the firm prepared or 
     issued audit reports during the immediately preceding 
     calendar year, and for which the firm expects to prepare or 
     issue audit reports during the current calendar year;
       (B) the annual fees received by the firm from each such 
     issuer for audit services, other accounting services, and 
     non-audit services, respectively;
       (C) such other current financial information for the most 
     recently completed fiscal year of the firm as the Board may 
     reasonably request;
       (D) a statement of the quality control policies of the firm 
     for its accounting and auditing practices;
       (E) a list of all accountants associated with the firm who 
     participate in or contribute to the preparation of audit 
     reports, stating the license or certification number of each 
     such person, as well as the State license numbers of the firm 
     itself;
       (F) information relating to criminal, civil, or 
     administrative actions or disciplinary proceedings pending 
     against the firm or any associated person of the firm in 
     connection with any audit report;
       (G) copies of any periodic or annual disclosure filed by an 
     issuer with the Commission during the immediately preceding 
     calendar year which discloses accounting disagreements 
     between such issuer and the firm in connection with an audit 
     report furnished or prepared by the firm for such issuer; and
       (H) such other information as the rules of the Board or the 
     Commission shall specify as necessary or appropriate in the 
     public interest or for the protection of investors.
       (3) Consents.--Each application for registration under this 
     subsection shall include--
       (A) a consent executed by the public accounting firm to 
     cooperation in and compliance with any request for testimony 
     or the production of documents made by the Board in the 
     furtherance of its authority and responsibilities under this 
     title (and an agreement to secure and enforce similar 
     consents from each of the associated persons of the public 
     accounting firm as a condition of their continued employment 
     by or other association with such firm); and
       (B) a statement that such firm understands and agrees that 
     cooperation and compliance, as described in the consent 
     required by subparagraph (A), and the securing and 
     enforcement of such consents from its associated persons, in 
     accordance with the rules of the Board, shall be a condition 
     to the continuing effectiveness of the registration of the 
     firm with the Board.
       (c) Action on Applications.--
       (1) Timing.--The Board shall approve a completed 
     application for registration not later than 45 days after the 
     date of receipt of the application, in accordance with the 
     rules of the Board, unless the Board, prior to such date, 
     issues a written notice of disapproval to, or requests more 
     information from, the prospective registrant.
       (2) Treatment.--A written notice of disapproval of a 
     completed application under paragraph (1) for registration 
     shall be treated as a disciplinary sanction for purposes of 
     sections 105(d) and 107(c).
       (d) Periodic Reports.--Each registered public accounting 
     firm shall submit an annual report to the Board, and may be 
     required to report more frequently, as necessary to update 
     the information contained in its application for registration 
     under this section, and to provide to the Board such 
     additional information as the Board or the Commission may 
     specify, in accordance with subsection (b)(2).
       (e) Public Availability.--Registration applications and 
     annual reports required by this subsection, or such portions 
     of such applications or reports as may be designated under 
     rules of the Board, shall be made available for public 
     inspection, subject to rules of the Board or the Commission, 
     and to applicable laws relating to the confidentiality of 
     proprietary, personal, or other information contained in such 
     applications or reports, provided that, in all events, the 
     Board shall protect from public disclosure information 
     reasonably identified by the subject accounting firm as 
     proprietary information.
       (f) Registration and Annual Fees.--The Board shall assess 
     and collect a registration fee and an annual fee from each 
     registered public accounting firm, in amounts that are 
     sufficient to recover the costs of processing and reviewing 
     applications and annual reports.

     SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE 
                   STANDARDS AND RULES.

       (a) Auditing, Quality Control, and Ethics Standards.--
       (1) In general.--The Board shall, by rule, establish, 
     including, to the extent it determines appropriate, through 
     adoption of standards proposed by 1 or more professional 
     groups of accountants designated pursuant to paragraph (3)(A) 
     or advisory groups convened pursuant to

[[Page 14368]]

     paragraph (4), and amend or otherwise modify or alter, such 
     auditing and related attestation standards, such quality 
     control standards, and such ethics standards to be used by 
     registered public accounting firms in the preparation and 
     issuance of audit reports, as required by this Act or the 
     rules of the Commission, or as may be necessary or 
     appropriate in the public interest or for the protection of 
     investors.
       (2) Rule requirements.--In carrying out paragraph (1), the 
     Board--
       (A) shall include in the auditing standards that it adopts, 
     requirements that each registered public accounting firm 
     shall--
       (i) prepare, and maintain for a period of not less than 7 
     years, audit work papers, and other information related to 
     any audit report, in sufficient detail to support the 
     conclusions reached in such report;
       (ii) provide a concurring or second partner review and 
     approval of such audit report (and other related 
     information), and concurring approval in its issuance, by a 
     qualified person (as prescribed by the Board) associated with 
     the public accounting firm, other than the person in charge 
     of the audit, or by an independent reviewer (as prescribed by 
     the Board); and
       (iii) describe in each audit report the scope of the 
     auditor's testing of the internal control structure and 
     procedures of the issuer, required by section 404(b), and 
     present (in such report or in a separate report)--

       (I) the findings of the auditor from such testing;
       (II) an evaluation of whether such internal control 
     structure and procedures--

       (aa) include maintenance of records that in reasonable 
     detail accurately and fairly reflect the transactions and 
     dispositions of the assets of the issuer;
       (bb) provide reasonable assurance that transactions are 
     recorded as necessary to permit preparation of financial 
     statements in accordance with generally accepted accounting 
     principles, and that receipts and expenditures of the issuer 
     are being made only in accordance with authorizations of 
     management and directors of the issuer; and

       (III) a description, at a minimum, of material weaknesses 
     in such internal controls, and of any material noncompliance 
     found on the basis of such testing.

       (B) shall include, in the quality control standards that it 
     adopts with respect to the issuance of audit reports, 
     requirements for every registered public accounting firm 
     relating to--
       (i) monitoring of professional ethics and independence from 
     issuers on behalf of which the firm issues audit reports;
       (ii) consultation within such firm on accounting and 
     auditing questions;
       (iii) supervision of audit work;
       (iv) hiring, professional development, and advancement of 
     personnel;
       (v) the acceptance and continuation of engagements;
       (vi) internal inspection; and
       (vii) such other requirements as the Board may prescribe, 
     subject to subsection (a)(1).
       (3) Authority to adopt other standards.--
       (A) In general.--In carrying out this subsection, the 
     Board--
       (i) may adopt as its rules, subject to the terms of section 
     107, any portion of any statement of auditing standards or 
     other professional standards that the Board determines 
     satisfy the requirements of paragraph (1), and that were 
     proposed by 1 or more professional groups of accountants that 
     shall be designated or recognized by the Board, by rule, for 
     such purpose, pursuant to this paragraph or 1 or more 
     advisory groups convened pursuant to paragraph (4); and
       (ii) notwithstanding clause (i), shall retain full 
     authority to modify, supplement, revise, or subsequently 
     amend, modify, or repeal, in whole or in part, any portion of 
     any statement described in clause (i).
       (B) Initial and transitional standards.--The Board shall 
     adopt standards described in subparagraph (A)(i) as initial 
     or transitional standards, to the extent the Board determines 
     necessary, prior to a determination of the Commission under 
     section 101(d), and such standards shall be separately 
     approved by the Commission at the time of that determination, 
     without regard to the procedures required by section 107 that 
     otherwise would apply to the approval of rules of the Board.
       (4) Advisory groups.--The Board shall convene, or authorize 
     its staff to convene, such expert advisory groups as may be 
     appropriate, which may include practicing accountants and 
     other experts, as well as representatives of other interested 
     groups, subject to such rules as the Board may prescribe to 
     prevent conflicts of interest, to make recommendations 
     concerning the content (including proposed drafts) of 
     auditing, quality control, ethics, independence, or other 
     standards required to be established under this section.
       (b) Independence Standards and Rules.--The Board shall 
     establish such rules as may be necessary or appropriate in 
     the public interest or for the protection of investors, to 
     implement, or as authorized under, title II of this Act.
       (c) Cooperation With Designated Professional Groups of 
     Accountants and Advisory Groups.--
       (1) In general.--The Board shall cooperate on an ongoing 
     basis with professional groups of accountants designated 
     under subsection (a)(3)(A) and advisory groups convened under 
     subsection (a)(4) in the examination of the need for changes 
     in any standards subject to its authority under subsection 
     (a), recommend issues for inclusion on the agendas of such 
     designated professional groups of accountants or advisory 
     groups, and take such other steps as it deems appropriate to 
     increase the effectiveness of the standard setting process.
       (2) Board responses.--The Board shall respond in a timely 
     fashion to requests from designated professional groups of 
     accountants and advisory groups referred to in paragraph (1) 
     for any changes in standards over which the Board has 
     authority.
       (d) Evaluation of Standard Setting Process.--The Board 
     shall include in the annual report required by section 101(h) 
     the results of its standard setting responsibilities during 
     the period to which the report relates, including a 
     discussion of the work of the Board with any designated 
     professional groups of accountants and advisory groups 
     described in paragraphs (3)(A) and (4) of subsection (a), and 
     its pending issues agenda for future standard setting 
     projects.

     SEC. 104. INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS.

       (a) In General.--The Board shall conduct a continuing 
     program of inspections to assess the degree of compliance of 
     each registered public accounting firm and associated persons 
     of that firm with this Act, the rules of the Board, the rules 
     of the Commission, or professional standards, in connection 
     with its performance of audits, issuance of audit reports, 
     and related matters involving issuers.
       (b) Inspection Frequency.--
       (1) In general.--Subject to paragraph (2), inspections 
     required by this section shall be conducted--
       (A) annually with respect to each registered public 
     accounting firm that regularly provides audit reports for 
     more than 100 issuers; and
       (B) not less frequently than once every 3 years with 
     respect to each registered public accounting firm that 
     regularly provides audit reports for 100 or fewer issuers.
       (2) Adjustments to schedules.--The Board may, by rule, 
     adjust the inspection schedules set under paragraph (1) if 
     the Board finds that different inspection schedules are 
     consistent with the purposes of this Act, the public 
     interest, and the protection of investors. The Board may 
     conduct special inspections at the request of the Commission 
     or upon its own motion.
       (c) Procedures.--The Board shall, in each inspection under 
     this section, and in accordance with its rules for such 
     inspections--
       (1) identify any act or practice or omission to act by the 
     registered public accounting firm, or by any associated 
     person thereof, revealed by such inspection that may be in 
     violation of this Act, the rules of the Board, the rules of 
     the Commission, the firm's own quality control policies, or 
     professional standards;
       (2) report any such act, practice, or omission, if 
     appropriate, to the Commission and each appropriate State 
     regulatory authority; and
       (3) begin a formal investigation or take disciplinary 
     action, if appropriate, with respect to any such violation, 
     in accordance with this Act and the rules of the Board.
       (d) Conduct of Inspections.--In conducting an inspection of 
     a registered public accounting firm under this section, the 
     Board shall--
       (1) inspect and review selected audit and review 
     engagements of the firm (which may include audit engagements 
     that are the subject of ongoing litigation or other 
     controversy between the firm and 1 or more third parties), 
     performed at various offices and by various associated 
     persons of the firm, as selected by the Board;
       (2) evaluate the sufficiency of the quality control system 
     of the firm, and the manner of the documentation and 
     communication of that system by the firm; and
       (3) perform such other testing of the audit, supervisory, 
     and quality control procedures of the firm as are necessary 
     or appropriate in light of the purpose of the inspection and 
     the responsibilities of the Board.
       (e) Record Retention.--The rules of the Board may require 
     the retention by registered public accounting firms for 
     inspection purposes of records whose retention is not 
     otherwise required by section 103 or the rules issued 
     thereunder.
       (f) Procedures for Review.--The rules of the Board shall 
     provide a procedure for the review of and response to a draft 
     inspection report by the registered public accounting firm 
     under inspection. The Board shall take such action with 
     respect to such response as it considers appropriate 
     (including revising the draft report or continuing or 
     supplementing its inspection activities before issuing a 
     final report), but the text of any such response, 
     appropriately redacted to protect information reasonably 
     identified by the accounting firm as confidential, shall be 
     attached to and made part of the inspection report.
       (g) Report.--A written report of the findings of the Board 
     for each inspection under this section, subject to subsection 
     (h), shall be--
       (1) transmitted, in appropriate detail, to the Commission 
     and each appropriate State regulatory authority, accompanied 
     by any letter or comments by the Board or the inspector, and 
     any letter of response from the registered public accounting 
     firm; and
       (2) made available in appropriate detail to the public 
     (subject to section 105(b)(5)(A), and to the protection of 
     such confidential and proprietary information as the Board 
     may determine to be appropriate, or as may be required by 
     law), except that no portions of the inspection report that 
     deal with criticisms of or potential defects in the quality 
     control systems of the firm under inspection shall be made 
     public if those criticisms or defects are addressed by the 
     firm, to the satisfaction of the Board, not later than 12 
     months after the date of the inspection report.

[[Page 14369]]

       (h) Interim Commission Review.--
       (1) Reviewable matters.--A registered public accounting 
     firm may seek review by the Commission, pursuant to such 
     rules as the Commission shall promulgate, if the firm--
       (A) has provided the Board with a response, pursuant to 
     rules issued by the Board under subsection (f), to the 
     substance of particular items in a draft inspection report, 
     and disagrees with the assessments contained in any final 
     report prepared by the Board following such response; or
       (B) disagrees with the determination of the Board that 
     criticisms or defects identified in an inspection report have 
     not been addressed to the satisfaction of the Board within 12 
     months of the date of the inspection report, for purposes of 
     subsection (g)(2).
       (2) Treatment of review.--Any decision of the Commission 
     with respect to a review under paragraph (1) shall not be 
     reviewable under section 25 of the Securities Exchange Act of 
     1934 (15 U.S.C. 78y), or deemed to be ``final agency action'' 
     for purposes of section 704 of title 5, United States Code.
       (3) Timing.--Review under paragraph (1) may be sought 
     during the 30-day period following the date of the event 
     giving rise to the review under subparagraph (A) or (B) of 
     paragraph (1).

     SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.

       (a) In General.--The Board shall establish, by rule, 
     subject to the requirements of this section, fair procedures 
     for the investigation and disciplining of registered public 
     accounting firms and associated persons of such firms.
       (b) Investigations.--
       (1) Authority.--In accordance with the rules of the Board, 
     the Board may conduct an investigation of any act or 
     practice, or omission to act, by a registered public 
     accounting firm, any associated person of such firm, or both, 
     that may violate any provision of this Act, the rules of the 
     Board, the provisions of the securities laws relating to the 
     preparation and issuance of audit reports and the obligations 
     and liabilities of accountants with respect thereto, 
     including the rules of the Commission issued under this Act, 
     or professional standards, regardless of how the act, 
     practice, or omission is brought to the attention of the 
     Board.
       (2) Testimony and document production.--In addition to such 
     other actions as the Board determines to be necessary or 
     appropriate, the rules of the Board may--
       (A) require the testimony of the firm or of any person 
     associated with a registered public accounting firm, with 
     respect to any matter that the Board considers relevant or 
     material to an investigation;
       (B) require the production of audit work papers and any 
     other document or information in the possession of a 
     registered public accounting firm or any associated person 
     thereof, wherever domiciled, that the Board considers 
     relevant or material to the investigation, and may inspect 
     the books and records of such firm or associated person to 
     verify the accuracy of any documents or information supplied;
       (C) request the testimony of, and production of any 
     document in the possession of, any other person, including 
     any client of a registered public accounting firm that the 
     Board considers relevant or material to an investigation 
     under this section, with appropriate notice, subject to the 
     needs of the investigation, as permitted under the rules of 
     the Board; and
       (D) provide for procedures to seek issuance by the 
     Commission, in a manner established by the Commission, of a 
     subpoena to require the testimony of, and production of any 
     document in the possession of, any person, including any 
     client of a registered public accounting firm, that the Board 
     considers relevant or material to an investigation under this 
     section.
       (3) Noncooperation with investigations.--
       (A) In general.--If a registered public accounting firm or 
     any associated person thereof refuses to testify, produce 
     documents, or otherwise cooperate with the Board in 
     connection with an investigation under this section, the 
     Board may--
       (i) suspend or bar such person from being associated with a 
     registered public accounting firm, or require the registered 
     public accounting firm to end such association;
       (ii) suspend or revoke the registration of the public 
     accounting firm; and
       (iii) invoke such other lesser sanctions as the Board 
     considers appropriate, and as specified by rule of the Board.
       (B) Procedure.--Any action taken by the Board under this 
     paragraph shall be subject to the terms of section 107(c).
       (4) Coordination and referral of investigations.--
       (A) Coordination.--The Board shall notify the Commission of 
     any pending Board investigation involving a potential 
     violation of the securities laws, and thereafter coordinate 
     its work with the work of the Commission's Division of 
     Enforcement, as necessary to protect an ongoing Commission 
     investigation.
       (B) Referral.--The Board may refer an investigation under 
     this section--
       (i) to the Commission;
       (ii) to any other Federal functional regulator (as defined 
     in section 509 of the Gramm-Leach-Bliley Act (15 U.S.C. 
     6809)), in the case of an investigation that concerns an 
     audit report for an institution that is subject to the 
     jurisdiction of such regulator; and
       (iii) at the direction of the Commission, to--

       (I) the Attorney General of the United States;
       (II) the attorney general of 1 or more States; and
       (III) the appropriate State regulatory authority.

       (5) Use of documents.--
       (A) Confidentiality.--Except as provided in subparagraph 
     (B), all documents and information prepared or received by or 
     specifically for the Board, and deliberations of the Board 
     and its employees and agents, in connection with an 
     inspection under section 104 or with an investigation under 
     this section, shall be confidential and privileged as an 
     evidentiary matter (and shall not be subject to civil 
     discovery or other legal process) in any proceeding in any 
     Federal or State court or administrative agency, and shall be 
     exempt from disclosure, in the hands of an agency or 
     establishment of the Federal Government, under the Freedom of 
     Information Act (5 U.S.C. 552a), or otherwise, unless and 
     until presented in connection with a public proceeding or 
     released in accordance with subsection (c).
       (B) Availability to government agencies.--Without the loss 
     of its status as confidential and privileged in the hands of 
     the Board, all information referred to in subparagraph (A) 
     may--
       (i) be made available to the Commission; and
       (ii) in the discretion of the Board, when determined by the 
     Board to be necessary to accomplish the purposes of this Act 
     or to protect investors, be made available to--

       (I) the Attorney General of the United States;
       (II) the appropriate Federal functional regulator (as 
     defined in section 509 of the Gramm-Leach-Bliley Act (15 
     U.S.C. 6809)), other than the Commission, with respect to an 
     audit report for an institution subject to the jurisdiction 
     of such regulator;
       (III) State attorneys general in connection with any 
     criminal investigation; and
       (IV) any appropriate State regulatory authority,

     each of which shall maintain such information as confidential 
     and privileged.
       (6) Immunity.--Any employee of the Board engaged in 
     carrying out an investigation under this Act shall be immune 
     from any civil liability arising out of such investigation in 
     the same manner and to the same extent as an employee of the 
     Federal Government in similar circumstances.
       (c) Disciplinary Procedures.--
       (1) Notification; recordkeeping.--The rules of the Board 
     shall provide that in any proceeding by the Board to 
     determine whether a registered public accounting firm, or an 
     associated person thereof, should be disciplined, the Board 
     shall--
       (A) bring specific charges with respect to the firm or 
     associated person;
       (B) notify such firm or associated person of, and provide 
     to the firm or associated person an opportunity to defend 
     against, such charges; and
       (C) keep a record of the proceedings.
       (2) Public hearings.--Hearings under this section shall not 
     be public, unless otherwise ordered by the Board for good 
     cause shown, with the consent of the parties to such hearing.
       (3) Supporting statement.--A determination by the Board to 
     impose a sanction under this subsection shall be supported by 
     a statement setting forth--
       (A) each act or practice in which the registered public 
     accounting firm, or associated person, has engaged (or 
     omitted to engage), or that forms a basis for all or a part 
     of such sanction;
       (B) the specific provision of this Act, the securities 
     laws, the rules of the Board, or professional standards which 
     the Board determines has been violated; and
       (C) the sanction imposed, including a justification for 
     that sanction.
       (4) Sanctions.--If the Board finds, based on all of the 
     facts and circumstances, that a registered public accounting 
     firm or associated person thereof has engaged in any act or 
     practice, or omitted to act, in violation of this Act, the 
     rules of the Board, the provisions of the securities laws 
     relating to the preparation and issuance of audit reports and 
     the obligations and liabilities of accountants with respect 
     thereto, including the rules of the Commission issued under 
     this Act, or professional standards, the Board may impose 
     such disciplinary or remedial sanctions as it determines 
     appropriate, subject to applicable limitations under 
     paragraph (5), including--
       (A) temporary suspension or permanent revocation of 
     registration under this title;
       (B) temporary or permanent suspension or bar of a person 
     from further association with any registered public 
     accounting firm;
       (C) temporary or permanent limitation on the activities, 
     functions, or operations of such firm or person (other than 
     in connection with required additional professional education 
     or training);
       (D) a civil money penalty for each such violation, in an 
     amount equal to--
       (i) not more than $100,000 for a natural person or 
     $2,000,000 for any other person; and
       (ii) in any case to which paragraph (5) applies, not more 
     than $750,000 for a natural person or $15,000,000 for any 
     other person;
       (E) censure;
       (F) required additional professional education or training; 
     or
       (G) any other appropriate sanction provided for in the 
     rules of the Board.
       (5) Intentional or other knowing conduct.--The sanctions 
     and penalties described in subparagraphs (A) through (C) and 
     (D)(ii) of paragraph (4) shall only apply to--
       (A) intentional or knowing conduct, including reckless 
     conduct, that results in violation of the applicable 
     statutory, regulatory, or professional standard; or

[[Page 14370]]

       (B) repeated instances of negligent conduct, each resulting 
     in a violation of the applicable statutory, regulatory, or 
     professional standard.
       (6) Failure to supervise.--
       (A) In general.--The Board may impose sanctions under this 
     section on a registered accounting firm or upon the 
     supervisory personnel of such firm, if the Board finds that--
       (i) the firm has failed reasonably to supervise an 
     associated person, either as required by the rules of the 
     Board relating to auditing or quality control standards, or 
     otherwise, with a view to preventing violations of this Act, 
     the rules of the Board, the provisions of the securities laws 
     relating to the preparation and issuance of audit reports and 
     the obligations and liabilities of accountants with respect 
     thereto, including the rules of the Commission under this 
     Act, or professional standards; and
       (ii) such associated person commits a violation of this 
     Act, or any of such rules, laws, or standards.
       (B) Rule of construction.--No associated person of a 
     registered public accounting firm shall be deemed to have 
     failed reasonably to supervise any other person for purposes 
     of subparagraph (A), if--
       (i) there have been established in and for that firm 
     procedures, and a system for applying such procedures, that 
     comply with applicable rules of the Board and that would 
     reasonably be expected to prevent and detect any such 
     violation by such associated person; and
       (ii) such person has reasonably discharged the duties and 
     obligations incumbent upon that person by reason of such 
     procedures and system, and had no reasonable cause to believe 
     that such procedures and system were not being complied with.
       (7) Effect of suspension.--
       (A) Association with a public accounting firm.--It shall be 
     unlawful for any person that is suspended or barred from 
     being associated with a registered public accounting firm 
     under this subsection willfully to become or remain 
     associated with any registered public accounting firm, or for 
     any registered public accounting firm that knew, or, in the 
     exercise of reasonable care should have known, of the 
     suspension or bar, to permit such an association, without the 
     consent of the Board or the Commission.
       (B) Association with an issuer.--It shall be unlawful for 
     any person that is suspended or barred from being associated 
     with an issuer under this subsection willfully to become or 
     remain associated with any issuer in an accountancy or a 
     financial management capacity, and for any issuer that knew, 
     or in the exercise of reasonable care should have known, of 
     such suspension or bar, to permit such an association, 
     without the consent of the Board or the Commission.
       (d) Reporting of Sanctions.--
       (1) Recipients.--If the Board imposes a disciplinary 
     sanction, in accordance with this section, the Board shall 
     report the sanction to--
       (A) the Commission;
       (B) any appropriate State regulatory authority or any 
     foreign accountancy licensing board with which such firm or 
     person is licensed or certified; and
       (C) the public (once any stay on the imposition of such 
     sanction has been lifted).
       (2) Contents.--The information reported under paragraph (1) 
     shall include--
       (A) the name of the sanctioned person;
       (B) a description of the sanction and the basis for its 
     imposition; and
       (C) such other information as the Board deems appropriate.
       (e) Stay of Sanctions.--
       (1) In general.--Application to the Commission for review, 
     or the institution by the Commission of review, of any 
     disciplinary action of the Board shall operate as a stay of 
     any such disciplinary action, unless and until the Commission 
     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) that no such stay shall continue to operate.
       (2) Expedited procedures.--The Commission shall establish 
     for appropriate cases an expedited procedure for 
     consideration and determination of the question of the 
     duration of a stay pending review of any disciplinary action 
     of the Board under this subsection.

     SEC. 106. FOREIGN PUBLIC ACCOUNTING FIRMS.

       (a) Applicability to Certain Foreign Firms.--
       (1) In general.--Any foreign public accounting firm that 
     prepares or furnishes an audit report with respect to any 
     issuer, shall be subject to this Act and the rules of the 
     Board and the Commission issued under this Act, in the same 
     manner and to the same extent as a public accounting firm 
     that is organized and operates under the laws of the United 
     States or any State, except that registration pursuant to 
     section 102 shall not by itself provide a basis for 
     subjecting such a foreign public accounting firm to the 
     jurisdiction of the Federal or State courts, other than with 
     respect to controversies between such firms and the Board.
       (2) Board authority.--The Board may, by rule, determine 
     that a foreign public accounting firm (or a class of such 
     firms) that does not issue audit reports nonetheless plays 
     such a substantial role in the preparation and furnishing of 
     such reports for particular issuers, that it is necessary or 
     appropriate, in light of the purposes of this Act and in the 
     public interest or for the protection of investors, that such 
     firm (or class of firms) should be treated as a public 
     accounting firm (or firms) for purposes of registration 
     under, and oversight by the Board in accordance with, this 
     title.
       (b) Production of Audit Workpapers.--
       (1) Consent by foreign firms.--If a foreign public 
     accounting firm issues an opinion or otherwise performs 
     material services upon which a registered public accounting 
     firm relies in issuing all or part of any audit report or any 
     opinion contained in an audit report, that foreign public 
     accounting firm shall be deemed to have consented--
       (A) to produce its audit workpapers for the Board or the 
     Commission in connection with any investigation by either 
     body with respect to that audit report; and
       (B) to be subject to the jurisdiction of the courts of the 
     United States for purposes of enforcement of any request for 
     production of such workpapers.
       (2) Consent by domestic firms.--A registered public 
     accounting firm that relies upon the opinion of a foreign 
     public accounting firm, as described in paragraph (1), shall 
     be deemed--
       (A) to have consented to supplying the audit workpapers of 
     that foreign public accounting firm in response to a request 
     for production by the Board or the Commission; and
       (B) to have secured the agreement of that foreign public 
     accounting firm to such production, as a condition of its 
     reliance on the opinion of that foreign public accounting 
     firm.
       (c) Exemption Authority.--The Commission, and the Board, 
     subject to the approval of the Commission, may, by rule, 
     regulation, or order, and as the Commission (or Board) 
     determines necessary or appropriate in the public interest or 
     for the protection of investors, either unconditionally or 
     upon specified terms and conditions exempt any foreign public 
     accounting firm, or any class of such firms, from any 
     provision of this Act or the rules of the Board or the 
     Commission issued under this Act.
       (d) Definition.--In this section, the term ``foreign public 
     accounting firm'' means a public accounting firm that is 
     organized and operates under the laws of a foreign government 
     or political subdivision thereof.

     SEC. 107. COMMISSION OVERSIGHT OF THE BOARD.

       (a) General Oversight Responsibility.--The Commission shall 
     have oversight and enforcement authority over the Board, as 
     provided in this Act. The provisions of section 17(a)(1) of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78q(a)(1)), 
     and of section 17(b)(1) of the Securities Exchange Act of 
     1934 (15 U.S.C. 78q(b)(1)) shall apply to the Board as fully 
     as if the Board were a ``registered securities association'' 
     for purposes of those sections 17(a)(1) and 17(b)(1).
       (b) Rules of the Board.--
       (1) Definition.--In this section, the term ``proposed 
     rule'' means any proposed rule of the Board, and any 
     modification of any such rule.
       (2) Prior approval required.--No rule of the Board shall 
     become effective without prior approval of the Commission in 
     accordance with this section, other than as provided in 
     section 103(a)(3)(B) with respect to initial or transitional 
     standards.
       (3) Approval criteria.--The Commission shall approve a 
     proposed rule, if it finds that the rule is consistent with 
     the requirements of this Act and the securities laws, or is 
     necessary or appropriate in the public interest or for the 
     protection of investors.
       (4) Proposed rule procedures.--The provisions of paragraphs 
     (1) through (3) of section 19(b) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78s(b)) shall govern the proposed 
     rules of the Board, as fully as if the Board were a 
     ``registered securities association'' for purposes of that 
     section 19(b), except that, for purposes of this paragraph--
       (A) the phrase ``consistent with the requirements of this 
     title and the rules and regulations thereunder applicable to 
     such organization'' in section 19(b)(2) of that Act shall be 
     deemed to read ``consistent with the requirements of title I 
     of the Sarbanes-Oxley Act of 2002, and the rules and 
     regulations issued thereunder applicable to such 
     organization, or as necessary or appropriate in the public 
     interest or for the protection of investors''; and
       (B) the phrase ``otherwise in furtherance of the purposes 
     of this title'' in section 19(b)(3)(C) of that Act shall be 
     deemed to read ``otherwise in furtherance of the purposes of 
     title I of the Sarbanes-Oxley Act of 2002''.
       (5) Commission authority to amend rules of the board.--The 
     provisions of section 19(c) of the Securities Exchange Act of 
     1934 (15 U.S.C. 78s(c)) shall govern the abrogation, 
     deletion, or addition to portions of the rules of the Board 
     by the Commission as fully as if the Board were a 
     ``registered securities association'' for purposes of that 
     section 19(c), except that the phrase ``to conform its rules 
     to the requirements of this title and the rules and 
     regulations thereunder applicable to such organization, or 
     otherwise in furtherance of the purposes of this title'' in 
     section 19(c) of that Act shall, for purposes of this 
     paragraph, be deemed to read ``to assure the fair 
     administration of the Public Company Accounting Oversight 
     Board, conform the rules promulgated by that Board to the 
     requirements of title I of the Sarbanes-Oxley Act of 2002, or 
     otherwise further the purposes of that Act, the securities 
     laws, and the rules and regulations thereunder applicable to 
     that Board''.
       (c) Commission Review of Disciplinary Action Taken by the 
     Board.--
       (1) Notice of sanction.--The Board shall promptly file 
     notice with the Commission of any final sanction on any 
     registered public accounting firm or on any associated person 
     thereof, in such form and containing such information as the 
     Commission, by rule, may prescribe.

[[Page 14371]]

       (2) Review of sanctions.--The provisions of sections 
     19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78s (d)(2) and (e)(1)) shall govern the review by 
     the Commission of final disciplinary sanctions imposed by the 
     Board (including sanctions imposed under section 105(b)(3) of 
     this Act for noncooperation in an investigation of the 
     Board), as fully as if the Board were a self-regulatory 
     organization and the Commission were the appropriate 
     regulatory agency for such organization for purposes of those 
     sections 19(d)(2) and 19(e)(1), except that, for purposes of 
     this paragraph--
       (A) section 105(e) of this Act (rather than that section 
     19(d)(2)) shall govern the extent to which application for, 
     or institution by the Commission on its own motion of, review 
     of any disciplinary action of the Board operates as a stay of 
     such action;
       (B) references in that section 19(e)(1) to ``members'' of 
     such an organization shall be deemed to be references to 
     registered public accounting firms;
       (C) the phrase ``consistent with the purposes of this 
     title'' in that section 19(e)(1) shall be deemed to read 
     ``consistent with the purposes of this title and title I of 
     the Sarbanes-Oxley Act of 2002'';
       (D) references to rules of the Municipal Securities 
     Rulemaking Board in that section 19(e)(1) shall not apply; 
     and
       (E) the reference to section 19(e)(2) of the Securities 
     Exchange Act of 1934 shall refer instead to section 107(c)(3) 
     of this Act.
       (3) Commission modification authority.--The Commission may 
     enhance, modify, cancel, reduce, or require the remission of 
     a sanction imposed by the Board upon a registered public 
     accounting firm or associated person thereof, if the 
     Commission, having due regard for the public interest and the 
     protection of investors, finds, after a proceeding in 
     accordance with this subsection, that the sanction--
       (A) is not necessary or appropriate in furtherance of this 
     Act or the securities laws; or
       (B) is excessive, oppressive, inadequate, or otherwise not 
     appropriate to the finding or the basis on which the sanction 
     was imposed.
       (d) Censure of the Board; Other Sanctions.--
       (1) Rescission of board authority.--The Commission, by 
     rule, consistent with the public interest, the protection of 
     investors, and the other purposes of this Act and the 
     securities laws, may relieve the Board of any responsibility 
     to enforce compliance with any provision of this Act, the 
     securities laws, the rules of the Board, or professional 
     standards.
       (2) Censure of the board; limitations.--The Commission may, 
     by order, as it determines necessary or appropriate in the 
     public interest, for the protection of investors, or 
     otherwise in furtherance of the purposes of this Act or the 
     securities laws, censure or impose limitations upon the 
     activities, functions, and operations of the Board, if the 
     Commission finds, on the record, after notice and opportunity 
     for a hearing, that the Board--
       (A) has violated or is unable to comply with any provision 
     of this Act, the rules of the Board, or the securities laws; 
     or
       (B) without reasonable justification or excuse, has failed 
     to enforce compliance with any such provision or rule, or any 
     professional standard by a registered public accounting firm 
     or an associated person thereof.
       (3) Censure of board members; removal from office.--The 
     Commission may, as necessary or appropriate in the public 
     interest, for the protection of investors, or otherwise in 
     furtherance of the purposes of this Act or the securities 
     laws, remove from office or censure any member of the Board, 
     if the Commission finds, on the record, after notice and 
     opportunity for a hearing, that such member--
       (A) has willfully violated any provision of this Act, the 
     rules of the Board, or the securities laws;
       (B) has willfully abused the authority of that member; or
       (C) without reasonable justification or excuse, has failed 
     to enforce compliance with any such provision or rule, or any 
     professional standard by any registered public accounting 
     firm or any associated person thereof.

     SEC. 108. ACCOUNTING STANDARDS.

       (a) Amendment to Securities Act of 1933.--Section 19 of the 
     Securities Act of 1933 (15 U.S.C. 77s) is amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (c) and (d), respectively; and
       (2) by inserting after subsection (a) the following:
       ``(b) Recognition of Accounting Standards.--
       ``(1) In general.--In carrying out its authority under 
     subsection (a) and under section 13(b) of the Securities 
     Exchange Act of 1934, the Commission may recognize, as 
     `generally accepted' for purposes of the securities laws, any 
     accounting principles established by a standard setting 
     body--
       ``(A) that--
       ``(i) is organized as a private entity;
       ``(ii) has, for administrative and operational purposes, a 
     board of trustees (or equivalent body) serving in the public 
     interest, the majority of whom are not, concurrent with their 
     service on such board, and have not been during the 2-year 
     period preceding such service, associated persons of any 
     registered public accounting firm;
       ``(iii) is funded as provided in section 109 of the 
     Sarbanes-Oxley Act of 2002;
       ``(iv) has adopted procedures to ensure prompt 
     consideration, by majority vote of its members, of changes to 
     accounting principles necessary to reflect emerging 
     accounting issues and changing business practices; and
       ``(v) considers, in adopting accounting principles, the 
     need to keep standards current in order to reflect changes in 
     the business environment, the extent to which international 
     convergence on high quality accounting standards is necessary 
     or appropriate in the public interest and for the protection 
     of investors; and
       ``(B) that the Commission determines has the capacity to 
     assist the Commission in fulfilling the requirements of 
     subsection (a) and section 13(b) of the Securities Exchange 
     Act of 1934, because, at a minimum, the standard setting body 
     is capable of improving the accuracy and effectiveness of 
     financial reporting and the protection of investors under the 
     securities laws.
       ``(2) Annual report.--A standard setting body described in 
     paragraph (1) shall submit an annual report to the Commission 
     and the public, containing audited financial statements of 
     that standard setting body.''.
       (b) Commission Authority.--The Commission shall promulgate 
     such rules and regulations to carry out section 19(b) of the 
     Securities Act of 1933, as added by this section, as it deems 
     necessary or appropriate in the public interest or for the 
     protection of investors.
       (c) No Effect on Commission Powers.--Nothing in this Act, 
     including this section and the amendment made by this 
     section, shall be construed to impair or limit the authority 
     of the Commission to establish accounting principles or 
     standards for purposes of enforcement of the securities laws.
       (d) Study and Report on Adopting Principles-Based 
     Accounting.--
       (1) Study.--
       (A) In general.--The Commission shall conduct a study on 
     the adoption by the United States financial reporting system 
     of a principles-based accounting system.
       (B) Study topics.--The study required by subparagraph (A) 
     shall include an examination of--
       (i) the extent to which principles-based accounting and 
     financial reporting exists in the United States;
       (ii) the length of time required for change from a rules-
     based to a principles-based financial reporting system;
       (iii) the feasibility of and proposed methods by which a 
     principles-based system may be implemented; and
       (iv) a thorough economic analysis of the implementation of 
     a principles-based system.
       (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall submit a report 
     on the results of the study required by paragraph (1) to the 
     Committee on Banking, Housing, and Urban Affairs of the 
     Senate and the Committee on Financial Services of the House 
     of Representatives.

     SEC. 109. FUNDING.

       (a) In General.--The Board, and the standard setting body 
     designated pursuant to section 19(b) of the Securities Act of 
     1933, as amended by section 108, shall be funded as provided 
     in this section.
       (b) Annual Budgets.--The Board and the standard setting 
     body referred to in subsection (a) shall each establish a 
     budget for each fiscal year, which shall be reviewed and 
     approved according to their respective internal procedures 
     not less than 1 month prior to the commencement of the fiscal 
     year to which the budget pertains (or at the beginning of the 
     Board's first fiscal year, which may be a short fiscal year). 
     The budget of the Board shall be subject to approval by the 
     Commission. The budget for the first fiscal year of the Board 
     shall be prepared and approved promptly following the 
     appointment of the initial five Board members, to permit 
     action by the Board of the organizational tasks contemplated 
     by section 101(d).
       (c) Sources and Uses of Funds.--
       (1) Recoverable budget expenses.--The budget of the Board 
     (reduced by any registration or annual fees received under 
     section 102(e) for the year preceding the year for which the 
     budget is being computed), and all of the budget of the 
     standard setting body referred to in subsection (a), for each 
     fiscal year of each of those 2 entities, shall be payable 
     from annual accounting support fees, in accordance with 
     subsections (d) and (e). Accounting support fees and other 
     receipts of the Board and of such standard-setting body shall 
     not be considered public monies of the United States.
       (2) Funds generated from the collection of monetary 
     penalties.--Subject to the availability in advance in an 
     appropriations Act, and notwithstanding subsection (i), all 
     funds collected by the Board as a result of the assessment of 
     monetary penalties shall be used to fund a merit scholarship 
     program for undergraduate and graduate students enrolled in 
     accredited accounting degree programs, which program is to be 
     administered by the Board or by an entity or agent identified 
     by the Board.
       (d) Annual Accounting Support Fee for the Board.--
       (1) Establishment of fee.--The Board shall establish, with 
     the approval of the Commission, a reasonable annual 
     accounting support fee (or a formula for the computation 
     thereof), as may be necessary or appropriate to establish and 
     maintain the Board. Such fee may also cover costs incurred in 
     the Board's first fiscal year (which may be a short fiscal 
     year), or may be levied separately with respect to such short 
     fiscal year.
       (2) Assessments.--The rules of the Board under paragraph 
     (1) shall provide for the equitable allocation, assessment, 
     and collection by the Board (or an agent appointed by the 
     Board)

[[Page 14372]]

     of the fee established under paragraph (1), among issuers, in 
     accordance with subsection (g), allowing for differentiation 
     among classes of issuers, as appropriate.
       (e) Annual Accounting Support Fee for Standard Setting 
     Body.--The annual accounting support fee for the standard 
     setting body referred to in subsection (a)--
       (1) shall be allocated in accordance with subsection (g), 
     and assessed and collected against each issuer, on behalf of 
     the standard setting body, by 1 or more appropriate 
     designated collection agents, as may be necessary or 
     appropriate to pay for the budget and provide for the 
     expenses of that standard setting body, and to provide for an 
     independent, stable source of funding for such body, subject 
     to review by the Commission; and
       (2) may differentiate among different classes of issuers.
       (f) Limitation on Fee.--The amount of fees collected under 
     this section for a fiscal year on behalf of the Board or the 
     standards setting body, as the case may be, shall not exceed 
     the recoverable budget expenses of the Board or body, 
     respectively (which may include operating, capital, and 
     accrued items), referred to in subsection (c)(1).
       (g) Allocation of Accounting Support Fees Among Issuers.--
     Any amount due from issuers (or a particular class of 
     issuers) under this section to fund the budget of the Board 
     or the standard setting body referred to in subsection (a) 
     shall be allocated among and payable by each issuer (or each 
     issuer in a particular class, as applicable) in an amount 
     equal to the total of such amount, multiplied by a fraction--
       (1) the numerator of which is the average monthly equity 
     market capitalization of the issuer for the 12-month period 
     immediately preceding the beginning of the fiscal year to 
     which such budget relates; and
       (2) the denominator of which is the average monthly equity 
     market capitalization of all such issuers for such 12-month 
     period.
       (h) Conforming Amendments.--Section 13(b)(2) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m(b)(2)) is 
     amended--
       (1) in subparagraph (A), by striking ``and'' at the end; 
     and
       (2) in subparagraph (B), by striking the period at the end 
     and inserting the following: ``; and
       ``(C) notwithstanding any other provision of law, pay the 
     allocable share of such issuer of a reasonable annual 
     accounting support fee or fees, determined in accordance with 
     section 109 of the Sarbanes-Oxley Act of 2002.''.
       (i) Rule of Construction.--Nothing in this section shall be 
     construed to render either the Board, the standard setting 
     body referred to in subsection (a), or both, subject to 
     procedures in Congress to authorize or appropriate public 
     funds, or to prevent such organization from utilizing 
     additional sources of revenue for its activities, such as 
     earnings from publication sales, provided that each 
     additional source of revenue shall not jeopardize, in the 
     judgment of the Commission, the actual and perceived 
     independence of such organization.
       (j) Start-Up Expenses of the Board.--From the unexpended 
     balances of the appropriations to the Commission for fiscal 
     year 2003, the Secretary of the Treasury is authorized to 
     advance to the Board not to exceed the amount necessary to 
     cover the expenses of the Board during its first fiscal year 
     (which may be a short fiscal year).
                     TITLE II--AUDITOR INDEPENDENCE

     SEC. 201. SERVICES OUTSIDE THE SCOPE OF PRACTICE OF AUDITORS.

       (a) Prohibited Activities.--Section 10A of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78j-1) is amended by adding 
     at the end the following:
       ``(g) Prohibited Activities.--Except as provided in 
     subsection (h), it shall be unlawful for a registered public 
     accounting firm (and any associated person of that firm, to 
     the extent determined appropriate by the Commission) that 
     performs for any issuer any audit required by this title or 
     the rules of the Commission under this title or, beginning 
     180 days after the date of commencement of the operations of 
     the Public Company Accounting Oversight Board established 
     under section 101 of the Sarbanes-Oxley Act of 2002 (in this 
     section referred to as the `Board'), the rules of the Board, 
     to provide to that issuer, contemporaneously with the audit, 
     any non-audit service, including--
       ``(1) bookkeeping or other services related to the 
     accounting records or financial statements of the audit 
     client;
       ``(2) financial information systems design and 
     implementation;
       ``(3) appraisal or valuation services, fairness opinions, 
     or contribution-in-kind reports;
       ``(4) actuarial services;
       ``(5) internal audit outsourcing services;
       ``(6) management functions or human resources;
       ``(7) broker or dealer, investment adviser, or investment 
     banking services;
       ``(8) legal services and expert services unrelated to the 
     audit; and
       ``(9) any other service that the Board determines, by 
     regulation, is impermissible.
       ``(h) Preapproval Required for Non-Audit Services.--A 
     registered public accounting firm may engage in any non-audit 
     service, including tax services, that is not described in any 
     of paragraphs (1) through (9) of subsection (g) for an audit 
     client, only if the activity is approved in advance by the 
     audit committee of the issuer, in accordance with subsection 
     (i).''.
       (b) Exemption Authority.--The Board may, on a case by case 
     basis, exempt any person, issuer, public accounting firm, or 
     transaction from the prohibition on the provision of services 
     under section 10A(g) of the Securities Exchange Act of 1934 
     (as added by this section), to the extent that such exemption 
     is necessary or appropriate in the public interest and is 
     consistent with the protection of investors, and subject to 
     review by the Commission in the same manner as for rules of 
     the Board under section 107.

     SEC. 202. PREAPPROVAL REQUIREMENTS.

       Section 10A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78j-1), as amended by this Act, is amended by adding 
     at the end the following:
       ``(i) Preapproval Requirements.--
       ``(1) In general.--
       ``(A) Audit committee action.--All auditing services (which 
     may entail providing comfort letters in connection with 
     securities underwritings or statutory audits required for 
     insurance companies for purposes of State law) and non-audit 
     services, other than as provided in subparagraph (B), 
     provided to an issuer by the auditor of the issuer shall be 
     preapproved by the audit committee of the issuer.
       ``(B) De minimus exception.--The preapproval requirement 
     under subparagraph (A) is waived with respect to the 
     provision of non-audit services for an issuer, if--
       ``(i) the aggregate amount of all such non-audit services 
     provided to the issuer constitutes not more than 5 percent of 
     the total amount of revenues paid by the issuer to its 
     auditor during the fiscal year in which the nonaudit services 
     are provided;
       ``(ii) such services were not recognized by the issuer at 
     the time of the engagement to be non-audit services; and
       ``(iii) such services are promptly brought to the attention 
     of the audit committee of the issuer and approved prior to 
     the completion of the audit by the audit committee or by 1 or 
     more members of the audit committee who are members of the 
     board of directors to whom authority to grant such approvals 
     has been delegated by the audit committee.
       ``(2) Disclosure to investors.--Approval by an audit 
     committee of an issuer under this subsection of a non-audit 
     service to be performed by the auditor of the issuer shall be 
     disclosed to investors in periodic reports required by 
     section 13(a).
       ``(3) Delegation authority.--The audit committee of an 
     issuer may delegate to 1 or more designated members of the 
     audit committee who are independent directors of the board of 
     directors, the authority to grant preapprovals required by 
     this subsection. The decisions of any member to whom 
     authority is delegated under this paragraph to preapprove an 
     activity under this subsection shall be presented to the full 
     audit committee at each of its scheduled meetings.
       ``(4) Approval of audit services for other purposes.--In 
     carrying out its duties under subsection (m)(2), if the audit 
     committee of an issuer approves an audit service within the 
     scope of the engagement of the auditor, such audit service 
     shall be deemed to have been preapproved for purposes of this 
     subsection.''.

     SEC. 203. AUDIT PARTNER ROTATION.

       Section 10A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78j-1), as amended by this Act, is amended by adding 
     at the end the following:
       ``(j) Audit Partner Rotation.--It shall be unlawful for a 
     registered public accounting firm to provide audit services 
     to an issuer if the lead (or coordinating) audit partner 
     (having primary responsibility for the audit), or the audit 
     partner responsible for reviewing the audit, has performed 
     audit services for that issuer in each of the 5 previous 
     fiscal years of that issuer.''.

     SEC. 204. AUDITOR REPORTS TO AUDIT COMMITTEES.

       Section 10A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78j-1), as amended by this Act, is amended by adding 
     at the end the following:
       ``(k) Reports to Audit Committees.--Each registered public 
     accounting firm that performs for any issuer any audit 
     required by this title shall timely report to the audit 
     committee of the issuer--
       ``(1) all critical accounting policies and practices to be 
     used;
       ``(2) all alternative treatments of financial information 
     within generally accepted accounting principles that have 
     been discussed with management officials of the issuer, 
     ramifications of the use of such alternative disclosures and 
     treatments, and the treatment preferred by the registered 
     public accounting firm; and
       ``(3) other material written communications between the 
     registered public accounting firm and the management of the 
     issuer, such as any management letter or schedule of 
     unadjusted differences.''.

     SEC. 205. CONFORMING AMENDMENTS.

       (a) Definitions.--Section 3(a) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the 
     end the following:
       ``(58) Audit committee.--The term `audit committee' means--
       ``(A) a committee (or equivalent body) established by and 
     amongst the board of directors of an issuer for the purpose 
     of overseeing the accounting and financial reporting 
     processes of the issuer and audits of the financial 
     statements of the issuer; and
       ``(B) if no such committee exists with respect to an 
     issuer, the entire board of directors of the issuer.
       ``(59) Registered public accounting firm.--The term 
     `registered public accounting firm' has the same meaning as 
     in section 2 of the Sarbanes-Oxley Act of 2002.''.
       (b) Auditor Requirements.--Section 10A of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78j-1) is amended--

[[Page 14373]]

       (1) by striking ``an independent public accountant'' each 
     place that term appears and inserting ``a registered public 
     accounting firm'';
       (2) by striking ``the independent public accountant'' each 
     place that term appears and inserting ``the registered public 
     accounting firm'';
       (3) in subsection (c), by striking ``No independent public 
     accountant'' and inserting ``No registered public accounting 
     firm''; and
       (4) in subsection (b)--
       (A) by striking ``the accountant'' each place that term 
     appears and inserting ``the firm'';
       (B) by striking ``such accountant'' each place that term 
     appears and inserting ``such firm''; and
       (C) in paragraph (4), by striking ``the accountant's 
     report'' and inserting ``the report of the firm''.
       (c) Other References.--The Securities Exchange Act of 1934 
     (15 U.S.C. 78a et seq.) is amended--
       (1) in section 12(b)(1) (15 U.S.C. 78l(b)(1)), by striking 
     ``independent public accountants'' each place that term 
     appears and inserting ``a registered public accounting 
     firm''; and
       (2) in subsections (e) and (i) of section 17 (15 U.S.C. 
     78q), by striking ``an independent public accountant'' each 
     place that term appears and inserting ``a registered public 
     accounting firm''.
       (d) Conforming Amendment.--Section 10A(f) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78k(f)) is amended--
       (1) by striking ``Definition'' and inserting 
     ``Definitions''; and
       (2) by adding at the end the following: ``As used in this 
     section, the term `issuer' means an issuer (as defined in 
     section 3), the securities of which are registered under 
     section 12, or that is required to file reports pursuant to 
     section 15(d), or that files or has filed a registration 
     statement that has not yet become effective under the 
     Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it 
     has not withdrawn.''.

     SEC. 206. CONFLICTS OF INTEREST.

       Section 10A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78j-1), as amended by this Act, is amended by adding 
     at the end the following:
       ``(l) Conflicts of Interest.--It shall be unlawful for a 
     registered public accounting firm to perform for an issuer 
     any audit service required by this title, if a chief 
     executive officer, controller, chief financial officer, chief 
     accounting officer, or any person serving in an equivalent 
     position for the issuer, was employed by that registered 
     independent public accounting firm and participated in any 
     capacity in the audit of that issuer during the 1-year period 
     preceding the date of the initiation of the audit.''.

     SEC. 207. STUDY OF MANDATORY ROTATION OF REGISTERED PUBLIC 
                   ACCOUNTING FIRMS.

       (a) Study and Review Required.--The Comptroller General of 
     the United States shall conduct a study and review of the 
     potential effects of requiring the mandatory rotation of 
     registered public accounting firms.
       (b) Report Required.--Not later than 1 year after the date 
     of enactment of this Act, the Comptroller General shall 
     submit a report to the Committee on Banking, Housing, and 
     Urban Affairs of the Senate and the Committee on Financial 
     Services of the House of Representatives on the results of 
     the study and review required by this section.
       (c) Definition.--For purposes of this section, the term 
     ``mandatory rotation'' refers to the imposition of a limit on 
     the period of years in which a particular registered public 
     accounting firm may be the auditor of record for a particular 
     issuer.

     SEC. 208. COMMISSION AUTHORITY.

       (a) Commission Regulations.--Not later than 180 days after 
     the date of enactment of this Act, the Commission shall issue 
     final regulations to carry out each of subsections (g) 
     through (l) of section 10A of the Securities Exchange Act of 
     1934, as added by this title.
       (b) Auditor Independence.--It shall be unlawful for any 
     registered public accounting firm (or an associated person 
     thereof, as applicable) to prepare or issue any audit report 
     with respect to any issuer, if the firm or associated person 
     engages in any activity with respect to that issuer 
     prohibited by any of subsections (g) through (l) of section 
     10A of the Securities Exchange Act of 1934, as added by this 
     title, or any rule or regulation of the Commission or of the 
     Board issued thereunder.

     SEC. 209. CONSIDERATIONS BY APPROPRIATE STATE REGULATORY 
                   AUTHORITIES.

       In supervising nonregistered public accounting firms and 
     their associated persons, appropriate State regulatory 
     authorities should make an independent determination of the 
     proper standards applicable, particularly taking into 
     consideration the size and nature of the business of the 
     accounting firms they supervise and the size and nature of 
     the business of the clients of those firms. The standards 
     applied by the Board under this Act should not be presumed to 
     be applicable for purposes of this section for small and 
     medium sized nonregistered public accounting firms.
                  TITLE III--CORPORATE RESPONSIBILITY

     SEC. 301. PUBLIC COMPANY AUDIT COMMITTEES.

       Section 10A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78f) is amended by adding at the end the following:
       ``(m) Standards Relating to Audit Committees.--
       ``(1) Commission rules.--
       ``(A) In general.--Effective not later than 270 days after 
     the date of enactment of this subsection, the Commission 
     shall, by rule, direct the national securities exchanges and 
     national securities associations to prohibit the listing of 
     any security of an issuer that is not in compliance with the 
     requirements of any portion of paragraphs (2) through (6).
       ``(B) Opportunity to cure defects.--The rules of the 
     Commission under subparagraph (A) shall provide for 
     appropriate procedures for an issuer to have an opportunity 
     to cure any defects that would be the basis for a prohibition 
     under subparagraph (A), before the imposition of such 
     prohibition.
       ``(2) Responsibilities relating to registered public 
     accounting firms.--The audit committee of each issuer, in its 
     capacity as a committee of the board of directors, shall be 
     directly responsible for the appointment, compensation, and 
     oversight of the work of any registered public accounting 
     firm employed by that issuer (including resolution of 
     disagreements between management and the auditor regarding 
     financial reporting) for the purpose of preparing or issuing 
     an audit report or related work, and each such registered 
     public accounting firm shall report directly to the audit 
     committee.
       ``(3) Independence.--
       ``(A) In general.--Each member of the audit committee of 
     the issuer shall be a member of the board of directors of the 
     issuer, and shall otherwise be independent.
       ``(B) Criteria.--In order to be considered to be 
     independent for purposes of this paragraph, a member of an 
     audit committee of an issuer may not, other than in his or 
     her capacity as a member of the audit committee, the board of 
     directors, or any other board committee--
       ``(i) accept any consulting, advisory, or other 
     compensatory fee from the issuer; or
       ``(ii) be an affiliated person of the issuer or any 
     subsidiary thereof.
       ``(C) Exemption authority.--The Commission may exempt from 
     the requirements of subparagraph (B) a particular 
     relationship with respect to audit committee members, as the 
     Commission determines appropriate in light of the 
     circumstances.
       ``(4) Complaints.--Each audit committee shall establish 
     procedures for--
       ``(A) the receipt, retention, and treatment of complaints 
     received by the issuer regarding accounting, internal 
     accounting controls, or auditing matters; and
       ``(B) the confidential, anonymous submission by employees 
     of the issuer of concerns regarding questionable accounting 
     or auditing matters.
       ``(5) Authority to engage advisers.--Each audit committee 
     shall have the authority to engage independent counsel and 
     other advisers, as it determines necessary to carry out its 
     duties.
       ``(6) Funding.--Each issuer shall provide for appropriate 
     funding, as determined by the audit committee, in its 
     capacity as a committee of the board of directors, for 
     payment of compensation--
       ``(A) to the registered public accounting firm employed by 
     the issuer for the purpose of rendering or issuing an audit 
     report; and
       ``(B) to any advisers employed by the audit committee under 
     paragraph (5).''.

     SEC. 302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

       (a) Regulations Required.--The Commission shall, by rule, 
     require, for each company filing periodic reports under 
     section 13(a) 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

[[Page 14374]]

     subsequent to the date of their evaluation, including any 
     corrective actions with regard to significant deficiencies 
     and material weaknesses.
       (b) Foreign Reincorporations Have No Effect.--Nothing in 
     this section 302 shall be interpreted or applied in any way 
     to allow any issuer to lessen the legal force of the 
     statement required under this section 302, by an issuer 
     having reincorporated or having engaged in any other 
     transaction that resulted in the transfer of the corporate 
     domicile or offices of the issuer from inside the United 
     States to outside of the United States.
       (c) Deadline.--The rules required by subsection (a) shall 
     be effective not later than 30 days after the date of 
     enactment of this Act.

     SEC. 303. IMPROPER INFLUENCE ON CONDUCT OF AUDITS.

       (a) Rules To Prohibit.--It shall be unlawful, in 
     contravention of such rules or regulations as the Commission 
     shall prescribe as necessary and appropriate in the public 
     interest or for the protection of investors, for any officer 
     or director of an issuer, or any other person acting under 
     the direction thereof, to take any action to fraudulently 
     influence, coerce, manipulate, or mislead any independent 
     public or certified accountant engaged in the performance of 
     an audit of the financial statements of that issuer for the 
     purpose of rendering such financial statements materially 
     misleading.
       (b) Enforcement.--In any civil proceeding, the Commission 
     shall have exclusive authority to enforce this section and 
     any rule or regulation issued under this section.
       (c) No Preemption of Other Law.--The provisions of 
     subsection (a) shall be in addition to, and shall not 
     supersede or preempt, any other provision of law or any rule 
     or regulation issued thereunder.
       (d) Deadline for Rulemaking.--The Commission shall--
       (1) propose the rules or regulations required by this 
     section, not later than 90 days after the date of enactment 
     of this Act; and
       (2) issue final rules or regulations required by this 
     section, not later than 270 days after that date of 
     enactment.

     SEC. 304. FORFEITURE OF CERTAIN BONUSES AND PROFITS.

       (a) Additional Compensation Prior to Noncompliance With 
     Commission Financial Reporting Requirements.--If an issuer is 
     required to prepare an accounting restatement due to the 
     material noncompliance of the issuer, as a result of 
     misconduct, with any financial reporting requirement under 
     the securities laws, the chief executive officer and chief 
     financial officer of the issuer shall reimburse the issuer 
     for--
       (1) any bonus or other incentive-based or equity-based 
     compensation received by that person from the issuer during 
     the 12-month period following the first public issuance or 
     filing with the Commission (whichever first occurs) of the 
     financial document embodying such financial reporting 
     requirement; and
       (2) any profits realized from the sale of securities of the 
     issuer during that 12-month period.
       (b) Commission Exemption Authority.--The Commission may 
     exempt any person from the application of subsection (a), as 
     it deems necessary and appropriate.

     SEC. 305. OFFICER AND DIRECTOR BARS AND PENALTIES.

       (a) Unfitness Standard.--
       (1) 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''.
       (2) 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''.
       (b) Equitable Relief.--Section 21(d) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78u(d)) is amended by adding 
     at the end the following:
       ``(5) Equitable Relief.--In any action or proceeding 
     brought or instituted by the Commission under any provision 
     of the securities laws, the Commission may seek, and any 
     Federal court may grant, any equitable relief that may be 
     appropriate or necessary for the benefit of investors.''.

     SEC. 306. INSIDER TRADES DURING PENSION FUND BLACKOUT 
                   PERIODS.

       (a) Prohibition of Insider Trading During Pension Fund 
     Blackout Periods.--
       (1) In general.--Except to the extent otherwise provided by 
     rule of the Commission pursuant to paragraph (3), it shall be 
     unlawful for any director or executive officer of an issuer 
     of any equity security (other than an exempted security), 
     directly or indirectly, to purchase, sell, or otherwise 
     acquire or transfer any equity security of the issuer (other 
     than an exempted security) during any blackout period with 
     respect to such equity security if such director or officer 
     acquires such equity security in connection with his or her 
     service or employment as a director or executive officer.
       (2) Remedy.--
       (A) In general.--Any profit realized by a director or 
     executive officer referred to in paragraph (1) from any 
     purchase, sale, or other acquisition or transfer in violation 
     of this subsection shall inure to and be recoverable by the 
     issuer, irrespective of any intention on the part of such 
     director or executive officer in entering into the 
     transaction.
       (B) Actions to recover profits.--An action to recover 
     profits in accordance with this subsection 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 fails or 
     refuses to bring such action within 60 days after the date of 
     request, or fails diligently to prosecute the action 
     thereafter, except that no such suit shall be brought more 
     than 2 years after the date on which such profit was 
     realized.
       (3) Rulemaking Authorized.--The Commission shall, in 
     consultation with the Secretary of Labor, issue rules to 
     clarify the application of this subsection and to prevent 
     evasion thereof. Such rules shall provide for the application 
     of the requirements of paragraph (1) with respect to entities 
     treated as a single employer with respect to an issuer under 
     section 414(b), (c), (m), or (o) of the Internal Revenue Code 
     of 1986 to the extent necessary to clarify the application of 
     such requirements and to prevent evasion thereof. Such rules 
     may also provide for appropriate exceptions from the 
     requirements of this subsection, including exceptions for 
     purchases pursuant to an automatic dividend reinvestment 
     program or purchases or sales made pursuant to an advance 
     election.
       (4) Blackout period.--For purposes of this subsection, the 
     term ``blackout period'', with respect to the equity 
     securities of any issuer--
       (A) means any period of more than 3 consecutive business 
     days during which the ability of not fewer than 50 percent of 
     the participants or beneficiaries under all individual 
     account plans maintained by the issuer to purchase, sell, or 
     otherwise acquire or transfer an interest in any equity of 
     such issuer held in such an individual account plan is 
     temporarily suspended by the issuer or by a fiduciary of the 
     plan; and
       (B) does not include, under regulations which shall be 
     prescribed by the Commission--
       (i) a regularly scheduled period in which the participants 
     and beneficiaries may not purchase, sell, or otherwise 
     acquire or transfer an interest in any equity of such issuer, 
     if such period is--

       (I) incorporated into the individual account plan; and
       (II) timely disclosed to employees before becoming 
     participants under the individual account plan or as a 
     subsequent amendment to the plan; or

       (ii) any suspension described in subparagraph (A) that is 
     imposed solely in connection with persons becoming 
     participants or beneficiaries, or ceasing to be participants 
     or beneficiaries, in an individual account plan by reason of 
     a corporate merger, acquisition, divestiture, or similar 
     transaction involving the plan or plan sponsor.
       (5) Individual account plan.--For purposes of this 
     subsection, the term ``individual account plan'' has the 
     meaning provided in section 3(34) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(34), except that 
     such term shall not include a one-participant retirement plan 
     (within the meaning of section 101(i)(8)(B) of such Act (29 
     U.S.C. 1021(i)(8)(B))).
       (6) Notice to directors, executive officers, and the 
     commission.--In any case in which a director or executive 
     officer is subject to the requirements of this subsection in 
     connection with a blackout period (as defined in paragraph 
     (4)) with respect to any equity securities, the issuer of 
     such equity securities shall timely notify such director or 
     officer and the Securities and Exchange Commission of such 
     blackout period.
       (b) Notice Requirements to Participants and Beneficiaries 
     under ERISA.--
       (1) In general.--Section 101 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021) is amended by 
     redesignating the second subsection (h) as subsection (j), 
     and by inserting after the first subsection (h) the following 
     new subsection:
       ``(i) Notice of Blackout Periods to Participant or 
     Beneficiary Under Individual Account Plan.--
       ``(1) Duties of plan administrator.--In advance of the 
     commencement of any blackout period with respect to an 
     individual account plan, the plan administrator shall notify 
     the plan participants and beneficiaries who are affected by 
     such action in accordance with this subsection.
       ``(2) Notice requirements.--
       ``(A) In general.--The notices described in paragraph (1) 
     shall be written in a manner calculated to be understood by 
     the average plan participant and shall include--
       ``(i) the reasons for the blackout period,
       ``(ii) an identification of the investments and other 
     rights affected,
       ``(iii) the expected beginning date and length of the 
     blackout period,
       ``(iv) in the case of investments affected, a statement 
     that the participant or beneficiary should evaluate the 
     appropriateness of their current investment decisions in 
     light of their inability to direct or diversify assets 
     credited to their accounts during the blackout period, and
       ``(v) such other matters as the Secretary may require by 
     regulation.
       ``(B) Notice to participants and beneficiaries.--Except as 
     otherwise provided in this subsection, notices described in 
     paragraph (1) shall be furnished to all participants and 
     beneficiaries under the plan to whom the blackout period 
     applies at least 30 days in advance of the blackout period.
       ``(C) Exception to 30-day notice requirement.--In any case 
     in which--
       ``(i) a deferral of the blackout period would violate the 
     requirements of subparagraph (A) or (B) of section 404(a)(1), 
     and a fiduciary of the plan reasonably so determines in 
     writing, or

[[Page 14375]]

       ``(ii) the inability to provide the 30-day advance notice 
     is due to events that were unforeseeable or circumstances 
     beyond the reasonable control of the plan administrator, and 
     a fiduciary of the plan reasonably so determines in writing,

     subparagraph (B) shall not apply, and the notice shall be 
     furnished to all participants and beneficiaries under the 
     plan to whom the blackout period applies as soon as 
     reasonably possible under the circumstances unless such a 
     notice in advance of the termination of the blackout period 
     is impracticable.
       ``(D) Written notice.--The notice required to be provided 
     under this subsection shall be in writing, except that such 
     notice may be in electronic or other form to the extent that 
     such form is reasonably accessible to the recipient.
       ``(E) Notice to issuers of employer securities subject to 
     blackout period.--In the case of any blackout period in 
     connection with an individual account plan, the plan 
     administrator shall provide timely notice of such blackout 
     period to the issuer of any employer securities subject to 
     such blackout period.
       ``(3) Exception for blackout periods with limited 
     applicability.--In any case in which the blackout period 
     applies only to 1 or more participants or beneficiaries in 
     connection with a merger, acquisition, divestiture, or 
     similar transaction involving the plan or plan sponsor and 
     occurs solely in connection with becoming or ceasing to be a 
     participant or beneficiary under the plan by reason of such 
     merger, acquisition, divestiture, or transaction, the 
     requirement of this subsection that the notice be provided to 
     all participants and beneficiaries shall be treated as met if 
     the notice required under paragraph (1) is provided to such 
     participants or beneficiaries to whom the blackout period 
     applies as soon as reasonably practicable.
       ``(4) Changes in length of blackout period.--If, following 
     the furnishing of the notice pursuant to this subsection, 
     there is a change in the beginning date or length of the 
     blackout period (specified in such notice pursuant to 
     paragraph (2)(A)(iii)), the administrator shall provide 
     affected participants and beneficiaries notice of the change 
     as soon as reasonably practicable. In relation to the 
     extended blackout period, such notice shall meet the 
     requirements of paragraph (2)(D) and shall specify any 
     material change in the matters referred to in clauses (i) 
     through (v) of paragraph (2)(A).
       ``(5) Regulatory exceptions.--The Secretary may provide by 
     regulation for additional exceptions to the requirements of 
     this subsection which the Secretary determines are in the 
     interests of participants and beneficiaries.
       ``(6) Guidance and model notices.--The Secretary shall 
     issue guidance and model notices which meet the requirements 
     of this subsection.
       ``(7) Blackout period.--For purposes of this subsection--
       ``(A) In general.--The term `blackout period' means, in 
     connection with an individual account plan, any period for 
     which any ability of participants or beneficiaries under the 
     plan, which is otherwise available under the terms of such 
     plan, to direct or diversify assets credited to their 
     accounts, to obtain loans from the plan, or to obtain 
     distributions from the plan is temporarily suspended, 
     limited, or restricted, if such suspension, limitation, or 
     restriction is for any period of more than 3 consecutive 
     business days.
       ``(B) Exclusions.--The term `blackout period' does not 
     include a suspension, limitation, or restriction--
       ``(i) which occurs by reason of the application of the 
     securities laws (as defined in section 3(a)(47) of the 
     Securities Exchange Act of 1934),
       ``(ii) which is a change to the plan which provides for a 
     regularly scheduled suspension, limitation, or restriction 
     which is disclosed to participants or beneficiaries through 
     any summary of material modifications, any materials 
     describing specific investment alternatives under the plan, 
     or any changes thereto, or
       ``(iii) which applies only to 1 or more individuals, each 
     of whom is the participant, an alternate payee (as defined in 
     section 206(d)(3)(K)), or any other beneficiary pursuant to a 
     qualified domestic relations order (as defined in section 
     206(d)(3)(B)(i)).
       ``(8) Individual account plan.--
       ``(A) In general.--For purposes of this subsection, the 
     term `individual account plan' shall have the meaning 
     provided such term in section 3(34), except that such term 
     shall not include a one-participant retirement plan.
       ``(B) One-participant retirement plan.--For purposes of 
     subparagraph (A), the term `one-participant retirement plan' 
     means a retirement plan that--
       ``(i) on the first day of the plan year--

       ``(I) covered only the employer (and the employer's spouse) 
     and the employer owned the entire business (whether or not 
     incorporated), or
       ``(II) covered only one or more partners (and their 
     spouses) in a business partnership (including partners in an 
     S or C corporation (as defined in section 1361(a) of the 
     Internal Revenue Code of 1986)),

       ``(ii) meets the minimum coverage requirements of section 
     410(b) of the Internal Revenue Code of 1986 (as in effect on 
     the date of the enactment of this paragraph) without being 
     combined with any other plan of the business that covers the 
     employees of the business,
       ``(iii) does not provide benefits to anyone except the 
     employer (and the employer's spouse) or the partners (and 
     their spouses),
       ``(iv) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control, and
       ``(v) does not cover a business that leases employees.''.
       (2) Issuance of initial guidance and model notice.--The 
     Secretary of Labor shall issue initial guidance and a model 
     notice pursuant to section 101(i)(6) of the Employee 
     Retirement Income Security Act of 1974 (as added by this 
     subsection) not later than January 1, 2003. Not later than 75 
     days after the date of the enactment of this Act, the 
     Secretary shall promulgate interim final rules necessary to 
     carry out the amendments made by this subsection.
       (3) Civil penalties for failure to provide notice.--Section 
     502 of such Act (29 U.S.C. 1132) is amended--
       (A) in subsection (a)(6), by striking ``(5), or (6)'' and 
     inserting ``(5), (6), or (7)'';
       (B) by redesignating paragraph (7) of subsection (c) as 
     paragraph (8); and
       (C) by inserting after paragraph (6) of subsection (c) the 
     following new paragraph:
       ``(7) The Secretary may assess a civil penalty against a 
     plan administrator of up to $100 a day from the date of the 
     plan administrator's failure or refusal to provide notice to 
     participants and beneficiaries in accordance with section 
     101(i). For purposes of this paragraph, each violation with 
     respect to any single participant or beneficiary shall be 
     treated as a separate violation.''.
       (3) Plan amendments.--If any amendment made by this 
     subsection requires an amendment to any plan, such plan 
     amendment shall not be required to be made before the first 
     plan year beginning on or after the effective date of this 
     section, if--
       (A) during the period after such amendment made by this 
     subsection takes effect and before such first plan year, the 
     plan is operated in good faith compliance with the 
     requirements of such amendment made by this subsection, and
       (B) such plan amendment applies retroactively to the period 
     after such amendment made by this subsection takes effect and 
     before such first plan year.
       (c) Effective Date.--The provisions of this section 
     (including the amendments made thereby) shall take effect 180 
     days after the date of the enactment of this Act. Good faith 
     compliance with the requirements of such provisions in 
     advance of the issuance of applicable regulations thereunder 
     shall be treated as compliance with such provisions.

     SEC. 307. RULES OF PROFESSIONAL RESPONSIBILITY FOR ATTORNEYS.

       Not later than 180 days after the date of enactment of this 
     Act, the Commission shall issue rules, in the public interest 
     and for the protection of investors, setting forth minimum 
     standards of professional conduct for attorneys appearing and 
     practicing before the Commission in any way in the 
     representation of issuers, including a rule--
       (1) requiring an attorney to report evidence of a material 
     violation of securities law or breach of fiduciary duty or 
     similar violation by the company or any agent thereof, to the 
     chief legal counsel or the chief executive officer of the 
     company (or the equivalent thereof); and
       (2) if the counsel or officer does not appropriately 
     respond to the evidence (adopting, as necessary, appropriate 
     remedial measures or sanctions with respect to the 
     violation), requiring the attorney to report the evidence to 
     the audit committee of the board of directors of the issuer 
     or to another committee of the board of directors comprised 
     solely of directors not employed directly or indirectly by 
     the issuer, or to the board of directors.

     SEC. 308. FAIR FUNDS FOR INVESTORS.

       (a) Civil Penalties Added to Disgorgement Funds for the 
     Relief of Victims.--If in any judicial or administrative 
     action brought by the Commission under the securities laws 
     (as such term is defined in section 3(a)(47) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) the 
     Commission obtains an order requiring disgorgement against 
     any person for a violation of such laws or the rules or 
     regulations thereunder, or such person agrees in settlement 
     of any such action to such disgorgement, and the Commission 
     also obtains pursuant to such laws a civil penalty against 
     such person, the amount of such civil penalty shall, on the 
     motion or at the direction of the Commission, be added to and 
     become part of the disgorgement fund for the benefit of the 
     victims of such violation.
       (b) Acceptance of Additional Donations.--The Commission is 
     authorized to accept, hold, administer, and utilize gifts, 
     bequests and devises of property, both real and personal, to 
     the United States for a disgorgement fund described in 
     subsection (a). Such gifts, bequests, and devises of money 
     and proceeds from sales of other property received as gifts, 
     bequests, or devises shall be deposited in the disgorgement 
     fund and shall be available for allocation in accordance with 
     subsection (a).
       (c) Study Required.--
       (1) Subject of study.--The Commission shall review and 
     analyze--
       (A) enforcement actions by the Commission over the five 
     years preceding the date of the enactment of this Act that 
     have included proceedings to obtain civil penalties or 
     disgorgements to identify areas where such proceedings may be 
     utilized to efficiently, effectively, and fairly provide 
     restitution for injured investors; and
       (B) other methods to more efficiently, effectively, and 
     fairly provide restitution to injured investors, including 
     methods to improve the collection rates for civil penalties 
     and disgorgements.
       (2) Report Required.--The Commission shall report its 
     findings to the Committee on Financial Services of the House 
     of Representatives

[[Page 14376]]

     and the Committee on Banking, Housing, and Urban Affairs of 
     the Senate within 180 days after of the date of the enactment 
     of this Act, and shall use such findings to revise its rules 
     and regulations as necessary. The report shall include a 
     discussion of regulatory or legislative actions that are 
     recommended or that may be necessary to address concerns 
     identified in the study.
       (d) Conforming Amendments.--Each of the following 
     provisions is amended by inserting ``, except as otherwise 
     provided in section 308 of the Sarbanes-Oxley Act of 2002'' 
     after ``Treasury of the United States'':
       (1) Section 21(d)(3)(C)(i) of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78u(d)(3)(C)(i)).
       (2) Section 21A(d)(1) of such Act (15 U.S.C. 78u-1(d)(1)).
       (3) Section 20(d)(3)(A) of the Securities Act of 1933 (15 
     U.S.C. 77t(d)(3)(A)).
       (4) Section 42(e)(3)(A) of the Investment Company Act of 
     1940 (15 U.S.C. 80a-41(e)(3)(A)).
       (5) Section 209(e)(3)(A) of the Investment Advisers Act of 
     1940 (15 U.S.C. 80b-9(e)(3)(A)).
       (e) Definition.--As used in this section, the term 
     ``disgorgement fund'' means a fund established in any 
     administrative or judicial proceeding described in subsection 
     (a).
                TITLE IV--ENHANCED FINANCIAL DISCLOSURES

     SEC. 401. DISCLOSURES IN PERIODIC REPORTS.

       (a) Disclosures Required.--Section 13 of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at 
     the end the following:
       ``(i) Accuracy of Financial Reports.--Each financial report 
     that contains financial statements, and that is required to 
     be prepared in accordance with (or reconciled to) generally 
     accepted accounting principles under this title and filed 
     with the Commission shall reflect all material correcting 
     adjustments that have been identified by a registered public 
     accounting firm in accordance with generally accepted 
     accounting principles and the rules and regulations of the 
     Commission.
       ``(j) Off-Balance Sheet Transactions.--Not later than 180 
     days after the date of enactment of the Sarbanes-Oxley Act of 
     2002, the Commission shall issue final rules providing that 
     each annual and quarterly financial report required to be 
     filed with the Commission shall disclose all material off-
     balance sheet transactions, arrangements, obligations 
     (including contingent obligations), and other relationships 
     of the issuer with unconsolidated entities or other persons, 
     that may have a material current or future effect on 
     financial condition, changes in financial condition, results 
     of operations, liquidity, capital expenditures, capital 
     resources, or significant components of revenues or 
     expenses.''.
       (b) Commission Rules on Pro Forma Figures.--Not later than 
     180 days after the date of enactment of the Sarbanes-Oxley 
     Act fo 2002, the Commission shall issue final rules providing 
     that pro forma financial information included in any periodic 
     or other report filed with the Commission pursuant to the 
     securities laws, or in any public disclosure or press or 
     other release, shall be presented in a manner that--
       (1) does not contain an untrue statement of a material fact 
     or omit to state a material fact necessary in order to make 
     the pro forma financial information, in light of the 
     circumstances under which it is presented, not misleading; 
     and
       (2) reconciles it with the financial condition and results 
     of operations of the issuer under generally accepted 
     accounting principles.
       (c) Study and Report on Special Purpose Entities.--
       (1) Study required.--The Commission shall, not later than 1 
     year after the effective date of adoption of off-balance 
     sheet disclosure rules required by section 13(j) of the 
     Securities Exchange Act of 1934, as added by this section, 
     complete a study of filings by issuers and their disclosures 
     to determine--
       (A) the extent of off-balance sheet transactions, including 
     assets, liabilities, leases, losses, and the use of special 
     purpose entities; and
       (B) whether generally accepted accounting rules result in 
     financial statements of issuers reflecting the economics of 
     such off-balance sheet transactions to investors in a 
     transparent fashion.
       (2) Report and recommendations.--Not later than 6 months 
     after the date of completion of the study required by 
     paragraph (1), the Commission shall submit a report to the 
     President, the Committee on Banking, Housing, and Urban 
     Affairs of the Senate, and the Committee on Financial 
     Services of the House of Representatives, setting forth--
       (A) the amount or an estimate of the amount of off-balance 
     sheet transactions, including assets, liabilities, leases, 
     and losses of, and the use of special purpose entities by, 
     issuers filing periodic reports pursuant to section 13 or 15 
     of the Securities Exchange Act of 1934;
       (B) the extent to which special purpose entities are used 
     to facilitate off-balance sheet transactions;
       (C) whether generally accepted accounting principles or the 
     rules of the Commission result in financial statements of 
     issuers reflecting the economics of such transactions to 
     investors in a transparent fashion;
       (D) whether generally accepted accounting principles 
     specifically result in the consolidation of special purpose 
     entities sponsored by an issuer in cases in which the issuer 
     has the majority of the risks and rewards of the special 
     purpose entity; and
       (E) any recommendations of the Commission for improving the 
     transparency and quality of reporting off-balance sheet 
     transactions in the financial statements and disclosures 
     required to be filed by an issuer with the Commission.

     SEC. 402. ENHANCED CONFLICT OF INTEREST PROVISIONS.

       (a) Prohibition on Personal Loans to Executives.--Section 
     13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m), as 
     amended by this Act, is amended by adding at the end the 
     following:
       ``(k) Prohibition on Personal Loans to Executives.--
       ``(1) In general.--It shall be unlawful for any issuer (as 
     defined in section 2 of the Sarbanes-Oxley Act of 2002), 
     directly or indirectly, including through any subsidiary, to 
     extend or maintain credit, to arrange for the extension of 
     credit, or to renew an extension of credit, in the form of a 
     personal loan to or for any director or executive officer (or 
     equivalent thereof) of that issuer. An extension of credit 
     maintained by the issuer on the date of enactment of this 
     subsection shall not be subject to the provisions of this 
     subsection, provided that there is no material modification 
     to any term of any such extension of credit or any renewal of 
     any such extension of credit on or after that date of 
     enactment.
       ``(2) Limitation.--Paragraph (1) does not preclude any home 
     improvement and manufactured home loans (as that term is 
     defined in section 5 of the Home Owners' Loan Act (12 U.S.C. 
     1464)), consumer credit (as defined in section 103 of the 
     Truth in Lending Act (15 U.S.C. 1602)), or any extension of 
     credit under an open end credit plan (as defined in section 
     103 of the Truth in Lending Act (15 U.S.C. 1602)), or a 
     charge card (as defined in section 127(c)(4)(e) of the Truth 
     in Lending Act (15 U.S.C. 1637(c)(4)(e)), or any extension of 
     credit by a broker or dealer registered under section 15 of 
     this title to an employee of that broker or dealer to buy, 
     trade, or carry securities, that is permitted under rules or 
     regulations of the Board of Governors of the Federal Reserve 
     System pursuant to section 7 of this title (other than an 
     extension of credit that would be used to purchase the stock 
     of that issuer), that is--
       ``(A) made or provided in the ordinary course of the 
     consumer credit business of such issuer;
       ``(B) of a type that is generally made available by such 
     issuer to the public; and
       ``(C) made by such issuer on market terms, or terms that 
     are no more favorable than those offered by the issuer to the 
     general public for such extensions of credit.
       ``(3) Rule of construction for certain loans.--Paragraph 
     (1) does not apply to any loan made or maintained by an 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), if the 
     loan is subject to the insider lending restrictions of 
     section 22(h) of the Federal Reserve Act (12 U.S.C. 375b).''.

     SEC. 403. DISCLOSURES OF TRANSACTIONS INVOLVING MANAGEMENT 
                   AND PRINCIPAL STOCKHOLDERS.

       (a) Amendment.--Section 16 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78p) is amended by striking the heading of 
     such section and subsection (a) and inserting the following:

     ``SEC. 16. DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS.

       ``(a) Disclosures Required.--
       ``(1) Directors, officers, and principal stockholders 
     required to file.--Every 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 pursuant to section 12, or who is a director or 
     an officer of the issuer of such security, shall file the 
     statements required by this subsection with the Commission 
     (and, if such security is registered on a national securities 
     exchange, also with the exchange).
       ``(2) Time of filing.--The statements required by this 
     subsection shall be filed--
       ``(A) at the time of the registration of such security on a 
     national securities exchange or by the effective date of a 
     registration statement filed pursuant to section 12(g);
       ``(B) within 10 days after he or she becomes such 
     beneficial owner, director, or officer;
       ``(C) if there has been a change in such ownership, or if 
     such person shall have purchased or sold a security-based 
     swap agreement (as defined in section 206(b) of the Gramm-
     Leach-Bliley Act (15 U.S.C. 78c note)) involving such equity 
     security, before the end of the second business day following 
     the day on which the subject transaction has been executed, 
     or at such other time as the Commission shall establish, by 
     rule, in any case in which the Commission determines that 
     such 2-day period is not feasible.
       ``(3) Contents of statements.--A statement filed--
       ``(A) under subparagraph (A) or (B) of paragraph (2) shall 
     contain a statement of the amount of all equity securities of 
     such issuer of which the filing person is the beneficial 
     owner; and
       ``(B) under subparagraph (C) of such paragraph shall 
     indicate ownership by the filing person at the date of 
     filing, any such changes in such ownership, and such 
     purchases and sales of the security-based swap agreements as 
     have occurred since the most recent such filing under such 
     subparagraph.
       ``(4) Electronic filing and availability.--Beginning not 
     later than 1 year after the date of enactment of the 
     Sarbanes-Oxley Act of 2002--
       ``(A) a statement filed under subparagraph (C) of paragraph 
     (2) shall be filed electronically;
       ``(B) the Commission shall provide each such statement on a 
     publicly accessible Internet site not later than the end of 
     the business day following that filing; and

[[Page 14377]]

       ``(C) the issuer (if the issuer maintains a corporate 
     website) shall provide that statement on that corporate 
     website, not later than the end of the business day following 
     that filing.''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective 30 days after the date of the enactment of 
     this Act.

     SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS.

       (a) Rules Required.--The Commission shall prescribe rules 
     requiring each annual report required by section 13(a) or 
     15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m 
     or 78o(d)) to contain an internal control report, which 
     shall--
       (1) state the responsibility of management for establishing 
     and maintaining an adequate internal control structure and 
     procedures for financial reporting; and
       (2) contain an assessment, as of the end of the most recent 
     fiscal year of the issuer, of the effectiveness of the 
     internal control structure and procedures of the issuer for 
     financial reporting.
       (b) Internal Control Evaluation and Reporting.--With 
     respect to the internal control assessment required by 
     subsection (a), each registered public accounting firm that 
     prepares or issues the audit report for the issuer shall 
     attest to, and report on, the assessment made by the 
     management of the issuer. An attestation made under this 
     subsection shall be made in accordance with standards for 
     attestation engagements issued or adopted by the Board. Any 
     such attestation shall not be the subject of a separate 
     engagement.

     SEC. 405. EXEMPTION.

       Nothing in section 401, 402, or 404, the amendments made by 
     those sections, or the rules of the Commission under those 
     sections shall apply to any investment company registered 
     under section 8 of the Investment Company Act of 1940 (15 
     U.S.C. 80a-8).

     SEC. 406. CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS.

       (a) Code of Ethics Disclosure.--The Commission shall issue 
     rules to require each issuer, together with periodic reports 
     required pursuant to section 13(a) or 15(d) of the Securities 
     Exchange Act of 1934, to disclose whether or not, and if not, 
     the reason therefor, such issuer has adopted a code of ethics 
     for senior financial officers, applicable to its principal 
     financial officer and comptroller or principal accounting 
     officer, or persons performing similar functions.
       (b) Changes in Codes of Ethics.--The Commission shall 
     revise its regulations concerning matters requiring prompt 
     disclosure on Form 8-K (or any successor thereto) to require 
     the immediate disclosure, by means of the filing of such 
     form, dissemination by the Internet or by other electronic 
     means, by any issuer of any change in or waiver of the code 
     of ethics for senior financial officers.
       (c) Definition.--In this section, the term ``code of 
     ethics'' means such standards as are reasonably necessary to 
     promote--
       (1) honest and ethical conduct, including the ethical 
     handling of actual or apparent conflicts of interest between 
     personal and professional relationships;
       (2) full, fair, accurate, timely, and understandable 
     disclosure in the periodic reports required to be filed by 
     the issuer; and
       (3) compliance with applicable governmental rules and 
     regulations.
       (d) Deadline for Rulemaking.--The Commission shall--
       (1) propose rules to implement this section, not later than 
     90 days after the date of enactment of this Act; and
       (2) issue final rules to implement this section, not later 
     than 180 days after that date of enactment.

     SEC. 407. DISCLOSURE OF AUDIT COMMITTEE FINANCIAL EXPERT.

       (a) Rules Defining ``Financial Expert''.--The Commission 
     shall issue rules, as necessary or appropriate in the public 
     interest and consistent with the protection of investors, to 
     require each issuer, together with periodic reports required 
     pursuant to sections 13(a) and 15(d) of the Securities 
     Exchange Act of 1934, to disclose whether or not, and if not, 
     the reasons therefor, the audit committee of that issuer is 
     comprised of at least 1 member who is a financial expert, as 
     such term is defined by the Commission.
       (b) Considerations.--In defining the term ``financial 
     expert'' for purposes of subsection (a), the Commission shall 
     consider whether a person has, through education and 
     experience as a public accountant or auditor or a principal 
     financial officer, comptroller, or principal accounting 
     officer of an issuer, or from a position involving the 
     performance of similar functions--
       (1) an understanding of generally accepted accounting 
     principles and financial statements;
       (2) experience in--
       (A) the preparation or auditing of financial statements of 
     generally comparable issuers; and
       (B) the application of such principles in connection with 
     the accounting for estimates, accruals, and reserves;
       (3) experience with internal accounting controls; and
       (4) an understanding of audit committee functions.
       (c) Deadline for Rulemaking.--The Commission shall--
       (1) propose rules to implement this section, not later than 
     90 days after the date of enactment of this Act; and
       (2) issue final rules to implement this section, not later 
     than 180 days after that date of enactment.

     SEC. 408. ENHANCED REVIEW OF PERIODIC DISCLOSURES BY ISSUERS.

       (a) Regular and Systematic Review.--The Commission shall 
     review disclosures made by issuers reporting under section 
     13(a) of the Securities Exchange Act of 1934 (including 
     reports filed on Form 10-K), and which have a class of 
     securities listed on a national securities exchange or traded 
     on an automated quotation facility of a national securities 
     association, on a regular and systematic basis for the 
     protection of investors. Such review shall include a review 
     of an issuer's financial statement.
       (b) Review Criteria.--For purposes of scheduling the 
     reviews required by subsection (a), the Commission shall 
     consider, among other factors--
       (1) issuers that have issued material restatements of 
     financial results;
       (2) issuers that experience significant volatility in their 
     stock price as compared to other issuers;
       (3) issuers with the largest market capitalization;
       (4) emerging companies with disparities in price to earning 
     ratios;
       (5) issuers whose operations significantly affect any 
     material sector of the economy; and
       (6) any other factors that the Commission may consider 
     relevant.
       (c) Minimum Review Period.--In no event shall an issuer 
     required to file reports under section 13(a) or 15(d) of the 
     Securities Exchange Act of 1934 be reviewed under this 
     section less frequently than once every 3 years.

     SEC. 409. REAL TIME ISSUER DISCLOSURES.

       Section 13 of the Securities Exchange Act of 1934 (15 
     U.S.C. 78m), as amended by this Act, is amended by adding at 
     the end the following:
       ``(l) Real Time Issuer Disclosures.--Each issuer reporting 
     under section 13(a) or 15(d) shall disclose to the public on 
     a rapid and current basis such additional information 
     concerning material changes in the financial condition or 
     operations of the issuer, in plain English, which may include 
     trend and qualitative information and graphic presentations, 
     as the Commission determines, by rule, is necessary or useful 
     for the protection of investors and in the public 
     interest.''.
                 TITLE V--ANALYST CONFLICTS OF INTEREST

     SEC. 501. TREATMENT OF SECURITIES ANALYSTS BY REGISTERED 
                   SECURITIES ASSOCIATIONS AND NATIONAL SECURITIES 
                   EXCHANGES.

       (a) Rules Regarding Securities Analysts.--The Securities 
     Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by 
     inserting after section 15C the following new section:

     ``SEC. 15D. SECURITIES ANALYSTS AND RESEARCH REPORTS.

       ``(a) Analyst Protections.--The Commission, or upon the 
     authorization and direction of the Commission, a registered 
     securities association or national securities exchange, shall 
     have adopted, not later than 1 year after the date of 
     enactment of this section, rules reasonably designed to 
     address conflicts of interest that can arise when securities 
     analysts recommend equity securities in research reports and 
     public appearances, in order to improve the objectivity of 
     research and provide investors with more useful and reliable 
     information, including rules designed--
       ``(1) to foster greater public confidence in securities 
     research, and to protect the objectivity and independence of 
     securities analysts, by--
       ``(A) restricting the prepublication clearance or approval 
     of research reports by persons employed by the broker or 
     dealer who are engaged in investment banking activities, or 
     persons not directly responsible for investment research, 
     other than legal or compliance staff;
       ``(B) limiting the supervision and compensatory evaluation 
     of securities analysts to officials employed by the broker or 
     dealer who are not engaged in investment banking activities; 
     and
       ``(C) requiring that a broker or dealer and persons 
     employed by a broker or dealer who are involved with 
     investment banking activities may not, directly or 
     indirectly, retaliate against or threaten to retaliate 
     against any securities analyst employed by that broker or 
     dealer or its affiliates as a result of an adverse, negative, 
     or otherwise unfavorable research report that may adversely 
     affect the present or prospective investment banking 
     relationship of the broker or dealer with the issuer that is 
     the subject of the research report, except that such rules 
     may not limit the authority of a broker or dealer to 
     discipline a securities analyst for causes other than such 
     research report in accordance with the policies and 
     procedures of the firm;
       ``(2) to define periods during which brokers or dealers who 
     have participated, or are to participate, in a public 
     offering of securities as underwriters or dealers should not 
     publish or otherwise distribute research reports relating to 
     such securities or to the issuer of such securities;
       ``(3) to establish structural and institutional safeguards 
     within registered brokers or dealers to assure that 
     securities analysts are separated by appropriate 
     informational partitions within the firm from the review, 
     pressure, or oversight of those whose involvement in 
     investment banking activities might potentially bias their 
     judgment or supervision; and
       ``(4) to address such other issues as the Commission, or 
     such association or exchange, determines appropriate.
       ``(b) Disclosure.--The Commission, or upon the 
     authorization and direction of the Commission, a registered 
     securities association or national securities exchange, shall 
     have adopted, not later than 1 year after the date of 
     enactment

[[Page 14378]]

     of this section, rules reasonably designed to require each 
     securities analyst to disclose in public appearances, and 
     each registered broker or dealer to disclose in each research 
     report, as applicable, conflicts of interest that are known 
     or should have been known by the securities analyst or the 
     broker or dealer, to exist at the time of the appearance or 
     the date of distribution of the report, including--
       ``(1) the extent to which the securities analyst has debt 
     or equity investments in the issuer that is the subject of 
     the appearance or research report;
       ``(2) whether any compensation has been received by the 
     registered broker or dealer, or any affiliate thereof, 
     including the securities analyst, from the issuer that is the 
     subject of the appearance or research report, subject to such 
     exemptions as the Commission may determine appropriate and 
     necessary to prevent disclosure by virtue of this paragraph 
     of material non-public information regarding specific 
     potential future investment banking transactions of such 
     issuer, as is appropriate in the public interest and 
     consistent with the protection of investors;
       ``(3) whether an issuer, the securities of which are 
     recommended in the appearance or research report, currently 
     is, or during the 1-year period preceding the date of the 
     appearance or date of distribution of the report has been, a 
     client of the registered broker or dealer, and if so, stating 
     the types of services provided to the issuer;
       ``(4) whether the securities analyst received compensation 
     with respect to a research report, based upon (among any 
     other factors) the investment banking revenues (either 
     generally or specifically earned from the issuer being 
     analyzed) of the registered broker or dealer; and
       ``(5) such other disclosures of conflicts of interest that 
     are material to investors, research analysts, or the broker 
     or dealer as the Commission, or such association or exchange, 
     determines appropriate.
       ``(c) Definitions.--In this section--
       ``(1) the term `securities analyst' means any associated 
     person of a registered broker or dealer that is principally 
     responsible for, and any associated person who reports 
     directly or indirectly to a securities analyst in connection 
     with, the preparation of the substance of a research report, 
     whether or not any such person has the job title of 
     `securities analyst'; and
       ``(2) the term `research report' means a written or 
     electronic communication that includes an analysis of equity 
     securities of individual companies or industries, and that 
     provides information reasonably sufficient upon which to base 
     an investment decision.''.
       (b) Enforcement.--Section 21B(a) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78u-2(a)) is amended by inserting 
     ``15D,'' before ``15B''.
       (c) Commission Authority.--The Commission may promulgate 
     and amend its regulations, or direct a registered securities 
     association or national securities exchange to promulgate and 
     amend its rules, to carry out section 15D of the Securities 
     Exchange Act of 1934, as added by this section, as is 
     necessary for the protection of investors and in the public 
     interest.
              TITLE VI--COMMISSION RESOURCES AND AUTHORITY

     SEC. 601. AUTHORIZATION OF APPROPRIATIONS.

       Section 35 of the Securities Exchange Act of 1934 (15 
     U.S.C. 78kk) is amended to read as follows:

     ``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

       ``In addition to any other funds authorized to be 
     appropriated to the Commission, there are authorized to be 
     appropriated to carry out the functions, powers, and duties 
     of the Commission, $776,000,000 for fiscal year 2003, of 
     which--
       ``(1) $102,700,000 shall be available to fund additional 
     compensation, including salaries and benefits, as authorized 
     in the Investor and Capital Markets Fee Relief Act (Public 
     Law 107-123; 115 Stat. 2390 et seq.);
       ``(2) $108,400,000 shall be available for information 
     technology, security enhancements, and recovery and 
     mitigation activities in light of the terrorist attacks of 
     September 11, 2001; and
       ``(3) $98,000,000 shall be available to add not fewer than 
     an additional 200 qualified professionals to provide enhanced 
     oversight of auditors and audit services required by the 
     Federal securities laws, and to improve Commission 
     investigative and disciplinary efforts with respect to such 
     auditors and services, as well as for additional professional 
     support staff necessary to strengthen the programs of the 
     Commission involving Full Disclosure and Prevention and 
     Suppression of Fraud, risk management, industry technology 
     review, compliance, inspections, examinations, market 
     regulation, and investment management.''.

     SEC. 602. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.

       The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by inserting after section 4B the following:

     ``SEC. 4C. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.

       ``(a) Authority To Censure.--The Commission may censure any 
     person, or deny, temporarily or permanently, to any person 
     the privilege of appearing or practicing before the 
     Commission in any way, if that person is found by the 
     Commission, after notice and opportunity for hearing in the 
     matter--
       ``(1) not to possess the requisite qualifications to 
     represent others;
       ``(2) to be lacking in character or integrity, or to have 
     engaged in unethical or improper professional conduct; or
       ``(3) to have willfully violated, or willfully aided and 
     abetted the violation of, any provision of the securities 
     laws or the rules and regulations issued thereunder.
       ``(b) Definition.--With respect to any registered public 
     accounting firm or associated person, for purposes of this 
     section, the term `improper professional conduct' means--
       ``(1) intentional or knowing conduct, including reckless 
     conduct, that results in a violation of applicable 
     professional standards; and
       ``(2) negligent conduct in the form of--
       ``(A) a single instance of highly unreasonable conduct that 
     results in a violation of applicable professional standards 
     in circumstances in which the registered public accounting 
     firm or associated person knows, or should know, that 
     heightened scrutiny is warranted; or
       ``(B) repeated instances of unreasonable conduct, each 
     resulting in a violation of applicable professional 
     standards, that indicate a lack of competence to practice 
     before the Commission.''.

     SEC. 603. FEDERAL COURT AUTHORITY TO IMPOSE PENNY STOCK BARS.

       (a) Securities Exchange Act of 1934.--Section 21(d) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78u(d)), as 
     amended by this Act, is amended by adding at the end the 
     following:
       ``(6) Authority of a court to prohibit persons from 
     participating in an offering of penny stock.--
       ``(A) In general.--In any proceeding under paragraph (1) 
     against any person participating in, or, at the time of the 
     alleged misconduct who was participating in, an offering of 
     penny stock, the court may prohibit that person from 
     participating in an offering of penny stock, conditionally or 
     unconditionally, and permanently or for such period of time 
     as the court shall determine.
       ``(B) Definition.--For purposes of this paragraph, the term 
     `person participating in an offering of penny stock' includes 
     any person engaging in activities with a broker, dealer, or 
     issuer for purposes of issuing, trading, or inducing or 
     attempting to induce the purchase or sale of, any penny 
     stock. The Commission may, by rule or regulation, define such 
     term to include other activities, and may, by rule, 
     regulation, or order, exempt any person or class of persons, 
     in whole or in part, conditionally or unconditionally, from 
     inclusion in such term.''.
       (b) Securities Act of 1933.--Section 20 of the Securities 
     Act of 1933 (15 U.S.C. 77t) is amended by adding at the end 
     the following:
       ``(g) Authority of a Court To Prohibit Persons From 
     Participating in an Offering of Penny Stock.--
       ``(1) In general.--In any proceeding under subsection (a) 
     against any person participating in, or, at the time of the 
     alleged misconduct, who was participating in, an offering of 
     penny stock, the court may prohibit that person from 
     participating in an offering of penny stock, conditionally or 
     unconditionally, and permanently or for such period of time 
     as the court shall determine.
       ``(2) Definition.--For purposes of this subsection, the 
     term `person participating in an offering of penny stock' 
     includes any person engaging in activities with a broker, 
     dealer, or issuer for purposes of issuing, trading, or 
     inducing or attempting to induce the purchase or sale of, any 
     penny stock. The Commission may, by rule or regulation, 
     define such term to include other activities, and may, by 
     rule, regulation, or order, exempt any person or class of 
     persons, in whole or in part, conditionally or 
     unconditionally, from inclusion in such term.''.

     SEC. 604. QUALIFICATIONS OF ASSOCIATED PERSONS OF BROKERS AND 
                   DEALERS.

       (a) Brokers and Dealers.--Section 15(b)(4) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended--
       (1) by striking subparagraph (F) and inserting the 
     following:
       ``(F) is subject to any order of the Commission barring or 
     suspending the right of the person to be associated with a 
     broker or dealer;''; and
       (2) in subparagraph (G), by striking the period at the end 
     and inserting the following: ``; or
       ``(H) is subject to any final order of a State securities 
     commission (or any agency or officer performing like 
     functions), State authority that supervises or examines 
     banks, savings associations, or credit unions, State 
     insurance commission (or any agency or office performing like 
     functions), an appropriate Federal banking agency (as defined 
     in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
     1813(q))), or the National Credit Union Administration, 
     that--
       ``(i) bars such person from association with an entity 
     regulated by such commission, authority, agency, or officer, 
     or from engaging in the business of securities, insurance, 
     banking, savings association activities, or credit union 
     activities; or
       ``(ii) constitutes a final order based on violations of any 
     laws or regulations that prohibit fraudulent, manipulative, 
     or deceptive conduct.''.
       (b) Investment Advisers.--Section 203(e) of the Investment 
     Advisers Act of 1940 (15 U.S.C. 80b-3(e)) is amended--
       (1) by striking paragraph (7) and inserting the following:
       ``(7) is subject to any order of the Commission barring or 
     suspending the right of the person to be associated with an 
     investment adviser;'';
       (2) in paragraph (8), by striking the period at the end and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(9) is subject to any final order of a State securities 
     commission (or any agency or officer performing like 
     functions), State authority that supervises or examines 
     banks, savings associations, or credit unions, State 
     insurance commission (or any agency or office performing like

[[Page 14379]]

     functions), an appropriate Federal banking agency (as defined 
     in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
     1813(q))), or the National Credit Union Administration, 
     that--
       ``(A) bars such person from association with an entity 
     regulated by such commission, authority, agency, or officer, 
     or from engaging in the business of securities, insurance, 
     banking, savings association activities, or credit union 
     activities; or
       ``(B) constitutes a final order based on violations of any 
     laws or regulations that prohibit fraudulent, manipulative, 
     or deceptive conduct.''.
       (c) Conforming Amendments.--
       (1) Securities exchange act of 1934.--The Securities 
     Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--
       (A) in section 3(a)(39)(F) (15 U.S.C. 78c(a)(39)(F))--
       (i) by striking ``or (G)'' and inserting ``(H), or (G)''; 
     and
       (ii) by inserting ``, or is subject to an order or 
     finding,'' before ``enumerated'';
       (B) in each of section 15(b)(6)(A)(i) (15 U.S.C. 
     78o(b)(6)(A)(i)), paragraphs (2) and (4) of section 15B(c) 
     (15 U.S.C. 78o-4(c)), and subparagraphs (A) and (C) of 
     section 15C(c)(1) (15 U.S.C. 78o-5(c)(1))--
       (i) by striking ``or (G)'' each place that term appears and 
     inserting ``(H), or (G)''; and
       (ii) by striking ``or omission'' each place that term 
     appears, and inserting ``, or is subject to an order or 
     finding,''; and
       (C) in each of paragraphs (3)(A) and (4)(C) of section 
     17A(c) (15 U.S.C. 78q-1(c))--
       (i) by striking ``or (G)'' each place that term appears and 
     inserting ``(H), or (G)''; and
       (ii) by inserting ``, or is subject to an order or 
     finding,'' before ``enumerated'' each place that term 
     appears.
       (2) Investment advisers act of 1940.--Section 203(f) of the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is 
     amended--
       (A) by striking ``or (8)'' and inserting ``(8), or (9)''; 
     and
       (B) by inserting ``or (3)'' after ``paragraph (2)''.
                     TITLE VII--STUDIES AND REPORTS

     SEC. 701. GAO STUDY AND REPORT REGARDING CONSOLIDATION OF 
                   PUBLIC ACCOUNTING FIRMS.

       (a) Study Required.--The Comptroller General of the United 
     States shall conduct a study--
       (1) to identify--
       (A) the factors that have led to the consolidation of 
     public accounting firms since 1989 and the consequent 
     reduction in the number of firms capable of providing audit 
     services to large national and multi-national business 
     organizations that are subject to the securities laws;
       (B) the present and future impact of the condition 
     described in subparagraph (A) on capital formation and 
     securities markets, both domestic and international; and
       (C) solutions to any problems identified under subparagraph 
     (B), including ways to increase competition and the number of 
     firms capable of providing audit services to large national 
     and multinational business organizations that are subject to 
     the securities laws;
       (2) of the problems, if any, faced by business 
     organizations that have resulted from limited competition 
     among public accounting firms, including--
       (A) higher costs;
       (B) lower quality of services;
       (C) impairment of auditor independence; or
       (D) lack of choice; and
       (3) whether and to what extent Federal or State regulations 
     impede competition among public accounting firms.
       (b) Consultation.--In planning and conducting the study 
     under this section, the Comptroller General shall consult 
     with--
       (1) the Commission;
       (2) the regulatory agencies that perform functions similar 
     to the Commission within the other member countries of the 
     Group of Seven Industrialized Nations;
       (3) the Department of Justice; and
       (4) any other public or private sector organization that 
     the Comptroller General considers appropriate.
       (c) Report Required.--Not later than 1 year after the date 
     of enactment of this Act, the Comptroller General shall 
     submit a report on the results of the study required by this 
     section to the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives.

     SEC. 702. COMMISSION STUDY AND REPORT REGARDING CREDIT RATING 
                   AGENCIES.

       (a) Study Required.--
       (1) In general.--The Commission shall conduct a study of 
     the role and function of credit rating agencies in the 
     operation of the securities market.
       (2) Areas of consideration.--The study required by this 
     subsection shall examine--
       (A) the role of credit rating agencies in the evaluation of 
     issuers of securities;
       (B) the importance of that role to investors and the 
     functioning of the securities markets;
       (C) any impediments to the accurate appraisal by credit 
     rating agencies of the financial resources and risks of 
     issuers of securities;
       (D) any barriers to entry into the business of acting as a 
     credit rating agency, and any measures needed to remove such 
     barriers;
       (E) 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
       (F) 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 study 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 not later than 180 days after the 
     date of enactment of this Act.

     SEC. 703. STUDY AND REPORT ON VIOLATORS AND VIOLATIONS.

       (a) Study.--The Commission shall conduct a study to 
     determine, based upon information for the period from January 
     1, 1998, to December 31, 2001--
       (1) the number of securities professionals, defined as 
     public accountants, public accounting firms, investment 
     bankers, investment advisers, brokers, dealers, attorneys, 
     and other securities professionals practicing before the 
     Commission--
       (A) who have been found to have aided and abetted a 
     violation of the Federal securities laws, including rules or 
     regulations promulgated thereunder (collectively referred to 
     in this section as ``Federal securities laws''), but who have 
     not been sanctioned, disciplined, or otherwise penalized as a 
     primary violator in any administrative action or civil 
     proceeding, including in any settlement of such an action or 
     proceeding (referred to in this section as ``aiders and 
     abettors''); and
       (B) who have been found to have been primary violators of 
     the Federal securities laws;
       (2) a description of the Federal securities laws violations 
     committed by aiders and abettors and by primary violators, 
     including--
       (A) the specific provision of the Federal securities laws 
     violated;
       (B) the specific sanctions and penalties imposed upon such 
     aiders and abettors and primary violators, including the 
     amount of any monetary penalties assessed upon and collected 
     from such persons;
       (C) the occurrence of multiple violations by the same 
     person or persons, either as an aider or abettor or as a 
     primary violator; and
       (D) whether, as to each such violator, disciplinary 
     sanctions have been imposed, including any censure, 
     suspension, temporary bar, or permanent bar to practice 
     before the Commission; and
       (3) the amount of disgorgement, restitution, or any other 
     fines or payments that the Commission has assessed upon and 
     collected from, aiders and abettors and from primary 
     violators.
       (b) Report.--A report based upon the study conducted 
     pursuant to subsection (a) shall be submitted to the 
     Committee on Banking, Housing, and Urban Affairs of the 
     Senate, and the Committee on Financial Services of the House 
     of Representatives not later than 6 months after the date of 
     enactment of this Act.

     SEC. 704. 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 restatements of financial statements, 
     over the 5-year period preceding the date of enactment of 
     this Act, 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, not later than 180 days after 
     the date of enactment of this Act, and shall use such 
     findings to revise its rules and regulations, as necessary. 
     The report shall include a discussion of regulatory or 
     legislative steps that are recommended or that may be 
     necessary to address concerns identified in the study.

     SEC. 705. STUDY OF INVESTMENT BANKS.

       (a) GAO Study.--The Comptroller General of the United 
     States shall conduct a study on whether investment banks and 
     financial advisers assisted public companies in manipulating 
     their earnings and obfuscating their true financial 
     condition. The study should address the rule of investment 
     banks and financial advisers--
       (1) in the collapse of the Enron Corporation, including 
     with respect to the design and implementation of derivatives 
     transactions, transactions involving special purpose 
     vehicles, and other financial arrangements that may have had 
     the effect of altering the company's reported financial 
     statements in ways that obscured the true financial picture 
     of the company;
       (2) in the failure of Global Crossing, including with 
     respect to transactions involving swaps of fiberoptic cable 
     capacity, in the designing transactions that may have had the 
     effect of altering the company's reported financial 
     statements in ways that obscured the true financial picture 
     of the company; and
       (3) generally, in creating and marketing transactions which 
     may have been designed solely to enable companies to 
     manipulate revenue streams, obtain loans, or move liabilities 
     off balance sheets without altering the economic and business 
     risks faced by the companies or any other mechanism to 
     obscure a company's financial picture.
       (b) Report.--The Comptroller General shall report to 
     Congress not later than 180 days after

[[Page 14380]]

     the date of enactment of this Act on the results of the study 
     required by this section. The report shall include a 
     discussion of regulatory or legislative steps that are 
     recommended or that may be necessary to address concerns 
     identified in the study.
        TITLE VIII--CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY

     SEC. 801. SHORT TITLE.

       This title may be cited as the ``Corporate and Criminal 
     Fraud Accountability Act of 2002''.

     SEC. 802. CRIMINAL PENALTIES FOR ALTERING DOCUMENTS.

       (a) In General.--Chapter 73 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1519. Destruction, alteration, or falsification of 
       records in Federal investigations and bankruptcy

       ``Whoever knowingly alters, destroys, mutilates, conceals, 
     covers up, falsifies, or makes a false entry in any record, 
     document, or tangible object with the intent to impede, 
     obstruct, or influence the investigation or proper 
     administration of any matter within the jurisdiction of any 
     department or agency of the United States or any case filed 
     under title 11, or in relation to or contemplation of any 
     such matter or case, shall be fined under this title, 
     imprisoned not more than 20 years, or both.

     ``Sec. 1520. Destruction of corporate audit records

       ``(a)(1) Any accountant who conducts an audit of an issuer 
     of securities to which section 10A(a) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78j-1(a)) applies, shall 
     maintain all audit or review workpapers for a period of 5 
     years from the end of the fiscal period in which the audit or 
     review was concluded.
       ``(2) The Securities and Exchange Commission shall 
     promulgate, within 180 days, after adequate notice and an 
     opportunity for comment, such rules and regulations, as are 
     reasonably necessary, relating to the retention of relevant 
     records such as workpapers, documents that form the basis of 
     an audit or review, memoranda, correspondence, 
     communications, other documents, and records (including 
     electronic records) which are created, sent, or received in 
     connection with an audit or review and contain conclusions, 
     opinions, analyses, or financial data relating to such an 
     audit or review, which is conducted by any accountant who 
     conducts an audit of an issuer of securities to which section 
     10A(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78j-
     1(a)) applies. The Commission may, from time to time, amend 
     or supplement the rules and regulations that it is required 
     to promulgate under this section, after adequate notice and 
     an opportunity for comment, in order to ensure that such 
     rules and regulations adequately comport with the purposes of 
     this section.
       ``(b) Whoever knowingly and willfully violates subsection 
     (a)(1), or any rule or regulation promulgated by the 
     Securities and Exchange Commission under subsection (a)(2), 
     shall be fined under this title, imprisoned not more than 10 
     years, or both.
       ``(c) Nothing in this section shall be deemed to diminish 
     or relieve any person of any other duty or obligation imposed 
     by Federal or State law or regulation to maintain, or refrain 
     from destroying, any document.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 73 of title 18, United States Code, is 
     amended by adding at the end the following new items:

``1519. Destruction, alteration, or falsification of records in Federal 
              investigations and bankruptcy.
``1520. Destruction of corporate audit records.''.

     SEC. 803. DEBTS NONDISCHARGEABLE IF INCURRED IN VIOLATION OF 
                   SECURITIES FRAUD LAWS.

       Section 523(a) of title 11, United States Code, is 
     amended--
       (1) in paragraph (17), by striking ``or'' after the 
     semicolon;
       (2) in paragraph (18), by striking the period at the end 
     and inserting ``; or''; and
       (3) by adding at the end, the following:
       ``(19) that--
       ``(A) is for--
       ``(i) the violation of any of the Federal securities laws 
     (as that term is defined in section 3(a)(47) of the 
     Securities Exchange Act of 1934), any of the State securities 
     laws, or any regulation or order issued under such Federal or 
     State securities laws; or
       ``(ii) common law fraud, deceit, or manipulation in 
     connection with the purchase or sale of any security; and
       ``(B) results from--
       ``(i) any judgment, order, consent order, or decree entered 
     in any Federal or State judicial or administrative 
     proceeding;
       ``(ii) any settlement agreement entered into by the debtor; 
     or
       ``(iii) any court or administrative order for any damages, 
     fine, penalty, citation, restitutionary payment, disgorgement 
     payment, attorney fee, cost, or other payment owed by the 
     debtor.''.

     SEC. 804. STATUTE OF LIMITATIONS FOR SECURITIES FRAUD.

       (a) In General.--Section 1658 of title 28, United States 
     Code, is amended--
       (1) by inserting ``(a)'' before ``Except''; and
       (2) by adding at the end the following:
       ``(b) Notwithstanding subsection (a), a private right of 
     action that involves a claim of fraud, deceit, manipulation, 
     or contrivance in contravention of a regulatory requirement 
     concerning the securities laws, as defined in section 
     3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(47)), may be brought not later than the earlier of--
       ``(1) 2 years after the discovery of the facts constituting 
     the violation; or
       ``(2) 5 years after such violation.''.
       (b) Effective Date.--The limitations period provided by 
     section 1658(b) of title 28, United States Code, as added by 
     this section, shall apply to all proceedings addressed by 
     this section that are commenced on or after the date of 
     enactment of this Act.
       (c) No Creation of Actions.--Nothing in this section shall 
     create a new, private right of action.

     SEC. 805. REVIEW OF FEDERAL SENTENCING GUIDELINES FOR 
                   OBSTRUCTION OF JUSTICE AND EXTENSIVE CRIMINAL 
                   FRAUD.

       (a) Enhancement of Fraud and Obstruction of Justice 
     Sentences.--Pursuant to section 994 of title 28, United 
     States Code, and in accordance with this section, the United 
     States Sentencing Commission shall review and amend, as 
     appropriate, the Federal Sentencing Guidelines and related 
     policy statements to ensure that--
       (1) the base offense level and existing enhancements 
     contained in United States Sentencing Guideline 2J1.2 
     relating to obstruction of justice are sufficient to deter 
     and punish that activity;
       (2) the enhancements and specific offense characteristics 
     relating to obstruction of justice are adequate in cases 
     where--
       (A) the destruction, alteration, or fabrication of evidence 
     involves--
       (i) a large amount of evidence, a large number of 
     participants, or is otherwise extensive;
       (ii) the selection of evidence that is particularly 
     probative or essential to the investigation; or
       (iii) more than minimal planning; or
       (B) the offense involved abuse of a special skill or a 
     position of trust;
       (3) the guideline offense levels and enhancements for 
     violations of section 1519 or 1520 of title 18, United States 
     Code, as added by this title, are sufficient to deter and 
     punish that activity;
       (4) a specific offense characteristic enhancing sentencing 
     is provided under United States Sentencing Guideline 2B1.1 
     (as in effect on the date of enactment of this Act) for a 
     fraud offense that endangers the solvency or financial 
     security of a substantial number of victims; and
       (5) the guidelines that apply to organizations in United 
     States Sentencing Guidelines, chapter 8, are sufficient to 
     deter and punish organizational criminal misconduct.
       (b) Emergency Authority and Deadline for Commission 
     Action.--The United States Sentencing Commission is requested 
     to promulgate the guidelines or amendments provided for under 
     this section as soon as practicable, and in any event not 
     later than 180 days after the date of enactment of this Act, 
     in accordance with the prcedures set forth in section 219(a) 
     of the Sentencing Reform Act of 1987, as though the authority 
     under that Act had not expired.

     SEC. 806. PROTECTION FOR EMPLOYEES OF PUBLICLY TRADED 
                   COMPANIES WHO PROVIDE EVIDENCE OF FRAUD.

       (a) In General.--Chapter 73 of title 18, United States 
     Code, is amended by inserting after section 1514 the 
     following:

     ``Sec. 1514A. Civil action to protect against retaliation in 
       fraud cases

       ``(a) Whistleblower Protection for Employees of Publicly 
     Traded Companies.--No company with a class of securities 
     registered under section 12 of the Securities Exchange Act of 
     1934 (15 U.S.C. 78l), or that is required to file reports 
     under section 15(d) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78o(d)), or any officer, employee, contractor, 
     subcontractor, or agent of such company, may discharge, 
     demote, suspend, threaten, harass, or in any other manner 
     discriminate against an employee in the terms and conditions 
     of employment because of any lawful act done by the 
     employee--
       ``(1) to provide information, cause information to be 
     provided, or otherwise assist in an investigation regarding 
     any conduct which the employee reasonably believes 
     constitutes a violation of section 1341, 1343, 1344, or 1348, 
     any rule or regulation of the Securities and Exchange 
     Commission, or any provision of Federal law relating to fraud 
     against shareholders, when the information or assistance is 
     provided to or the investigation is conducted by--
       ``(A) a Federal regulatory or law enforcement agency;
       ``(B) any Member of Congress or any committee of Congress; 
     or
       ``(C) a person with supervisory authority over the employee 
     (or such other person working for the employer who has the 
     authority to investigate, discover, or terminate misconduct); 
     or
       ``(2) to file, cause to be filed, testify, participate in, 
     or otherwise assist in a proceeding filed or about to be 
     filed (with any knowledge of the employer) relating to an 
     alleged violation of section 1341, 1343, 1344, or 1348, any 
     rule or regulation of the Securities and Exchange Commission, 
     or any provision of Federal law relating to fraud against 
     shareholders.
       ``(b) Enforcement Action.--
       ``(1) In general.--A person who alleges discharge or other 
     discrimination by any person in violation of subsection (a) 
     may seek relief under subsection (c), by--
       ``(A) filing a complaint with the Secretary of Labor; or
       ``(B) if the Secretary has not issued a final decision 
     within 180 days of the filing of the complaint and there is 
     no showing that such delay

[[Page 14381]]

     is due to the bad faith of the claimant, bringing an action 
     at law or equity for de novo review in the appropriate 
     district court of the United States, which shall have 
     jurisdiction over such an action without regard to the amount 
     in controversy.
       ``(2) Procedure.--
       ``(A) In general.--An action under paragraph (1)(A) shall 
     be governed under the rules and procedures set forth in 
     section 42121(b) of title 49, United States Code.
       ``(B) Exception.--Notification made under section 
     42121(b)(1) of title 49, United States Code, shall be made to 
     the person named in the complaint and to the employer.
       ``(C) Burdens of proof.--An action brought under paragraph 
     (1)(B) shall be governed by the legal burdens of proof set 
     forth in section 42121(b) of title 49, United States Code.
       ``(D) Statute of limitations.--An action under paragraph 
     (1) shall be commenced not later than 90 days after the date 
     on which the violation occurs.
       ``(c) Remedies.--
       ``(1) In general.--An employee prevailing in any action 
     under subsection (b)(1) shall be entitled to all relief 
     necessary to make the employee whole.
       ``(2) Compensatory damages.--Relief for any action under 
     paragraph (1) shall include--
       ``(A) reinstatement with the same seniority status that the 
     employee would have had, but for the discrimination;
       ``(B) the amount of back pay, with interest; and
       ``(C) compensation for any special damages sustained as a 
     result of the discrimination, including litigation costs, 
     expert witness fees, and reasonable attorney fees.
       ``(d) Rights Retained by Employee.--Nothing in this section 
     shall be deemed to diminish the rights, privileges, or 
     remedies of any employee under any Federal or State law, or 
     under any collective bargaining agreement.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 73 of title 18, United States Code, is 
     amended by inserting after the item relating to section 1514 
     the following new item:

``1514A. Civil action to protect against retaliation in fraud cases.''.

     SEC. 807. CRIMINAL PENALTIES FOR DEFRAUDING SHAREHOLDERS OF 
                   PUBLICLY TRADED COMPANIES.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1348. Securities fraud

       ``Whoever knowingly executes, or attempts to execute, a 
     scheme or artifice--
       ``(1) to defraud any person in connection with any security 
     of an issuer with a class of securities registered under 
     section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 
     78l) or that is required to file reports under section 15(d) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or
       ``(2) to obtain, by means of false or fraudulent pretenses, 
     representations, or promises, any money or property in 
     connection with the purchase or sale of any security of an 
     issuer with a class of securities registered under section 12 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or 
     that is required to file reports under section 15(d) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78o(d));
     shall be fined under this title, or imprisoned not more than 
     25 years, or both.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following new item:

``1348. Securities fraud.''.
           TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

     SEC. 901. SHORT TITLE.

       This title may be cited as the ``White-Collar Crime Penalty 
     Enhancement Act of 2002''.

     SEC. 902. ATTEMPTS AND CONSPIRACIES TO COMMIT CRIMINAL FRAUD 
                   OFFENSES.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by inserting after section 1348 as added by 
     this Act the following:

     ``Sec. 1349. Attempt and conspiracy

       ``Any person who attempts or conspires to commit any 
     offense under this chapter shall be subject to the same 
     penalties as those prescribed for the offense, the commission 
     of which was the object of the attempt or conspiracy.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following new item:

``1349. Attempt and conspiracy.''.

     SEC. 903. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 of title 18, United States 
     Code, is amended by striking ``five'' and inserting ``20''.
       (b) Wire Fraud.--Section 1343 of title 18, United States 
     Code, is amended by striking ``five'' and inserting ``20''.

     SEC. 904. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE 
                   RETIREMENT INCOME SECURITY ACT OF 1974.

       Section 501 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1131) is amended--
       (1) by striking ``$5,000'' and inserting ``$100,000'';
       (1) by striking ``one year'' and inserting ``10 years''; 
     and
       (3) by striking ``$100,000'' and inserting ``$500,000''.

     SEC. 905. AMENDMENT TO SENTENCING GUIDELINES RELATING TO 
                   CERTAIN WHITE-COLLAR OFFENSES.

       (a) Directive to the United States Sentencing Commission.--
     Pursuant to its authority under section 994(p) of title 18, 
     United States Code, and in accordance with this section, the 
     United States Sentencing Commission shall review and, as 
     appropriate, amend the Federal Sentencing Guidelines and 
     related policy statements to implement the provisions of this 
     Act.
       (b) Requirements.--In carrying out this section, the 
     Sentencing Commission shall--
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of the offenses and the 
     penalties set forth in this Act, the growing incidence of 
     serious fraud offenses which are identified above, and the 
     need to modify the sentencing guidelines and policy 
     statements to deter, prevent, and punish such offenses;
       (2) consider the extent to which the guidelines and policy 
     statements adequately address whether the guideline offense 
     levels and enhancements for violations of the sections 
     amended by this Act are sufficient to deter and punish such 
     offenses, and specifically, are adequate in view of the 
     statutory increases in penalties contained in this Act;
       (3) assure reasonable consistency with other relevant 
     directives and sentencing guidelines;
       (4) account for any additional aggravating or mitigating 
     circumstances that might justify exceptions to the generally 
     applicable sentencing ranges;
       (5) make any necessary conforming changes to the sentencing 
     guidelines; and
       (6) assure that the guidelines adequately meet the purposes 
     of sentencing, as set forth in section 3553(a)(2) of title 
     18, United States Code.
       (c) Emergency Authority and Deadline for Commission 
     Action.--The United States Sentencing Commission is requested 
     to promulgate the guidelines or amendments provided for under 
     this section as soon as practicable, and in any event not 
     later than 180 days after the date of enactment of this Act, 
     in accordance with the procedures set forth in section 219(a) 
     of the Sentencing Reform Act of 1987, as though the authority 
     under that Act had not expired.

     SEC. 906. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by inserting after section 1349, as created 
     by this Act, the following:

     ``Sec. 1350. Failure of corporate officers to certify 
       financial reports

       (a) Certification of Periodic Financial Reports.--Each 
     periodic report containing financial statements filed by an 
     issuer with the Securities Exchange Commission pursuant to 
     section 13(a) or 15(d) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a 
     written statement by the chief executive officer and chief 
     financial officer (or equivalent thereof) of the issuer.
       ``(b) Content.--The statement required under subsection (a) 
     shall certify that the periodic report containing the 
     financial statements fully complies with the requirements of 
     section 13(a) or 15(d) of the Securities Exchange Act pf 1934 
     (15 U.S.C. 78m or 78o(d)) and that information contained in 
     the periodic report fairly presents, in all material 
     respects, the financial condition and results of operations 
     of the issuer.
       ``(c) Criminal Penalties.--Whoever--
       ``(1) certifies any statement as set forth in subsections 
     (a) and (b) of this section knowing that the periodic report 
     accompanying the statement does not comport with all the 
     requirements set forth in this section shall be fined not 
     more than $1,000,000 or imprisoned not more than 10 years, or 
     both; or
       ``(2) willfully certifies any statement as set forth in 
     subsections (a) and (b) of this section knowing that the 
     periodic report accompanying the statement does not comport 
     with all the requirements set forth in this section shall be 
     fined not more than $5,000,000, or imprisoned not more than 
     20 years, or both.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1350. Failure of corporate officers to certify financial reports.''.
                     TITLE X--CORPORATE TAX RETURNS

     SEC. 1001. SENSE OF THE SENATE REGARDING THE SIGNING OF 
                   CORPORATE TAX RETURNS BY CHIEF EXECUTIVE 
                   OFFICERS.

       It is the sense of the Senate that the Federal income tax 
     return of a corporation should be signed by the chief 
     executive officer of such corporation.
                TITLE XI--CORPORATE FRAUD ACCOUNTABILITY

     SEC. 1101. SHORT TITLE.

       This title may be cited as the ``Corporate Fraud 
     Accountability Act of 2002''.

     SEC. 1102. TAMPERING WITH A RECORD OR OTHERWISE IMPEDING AN 
                   OFFICIAL PROCEEDING.

       Section 1512 of title 18, United States Code, is amended--
       (1) by redesignating subsections (c) through (i) as 
     subsections (d) through (j), respectively; and
       (2) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Whoever corruptly--
       ``(1) alters, destroys, mutilates, or conceals a record, 
     document, or other object, or attempts to

[[Page 14382]]

     do so, with the intent to impair the object's integrity or 
     availability for use in an official proceeding; or
       ``(2) otherwise obstructs, influences, or impedes any 
     official proceeding, or attempts to do so,
     shall be fined under this title or imprisoned not more than 
     20 years, or both.''.

     SEC. 1103. TEMPORARY FREEZE AUTHORITY FOR THE SECURITIES AND 
                   EXCHANGE COMMISSION.

       (a) In General.--Section 21C(c) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78u-3(c)) is amended by adding at the 
     end the following:
       ``(3) Temporary freeze.--
       ``(A) In general.--
       ``(i) Issuance of temporary order.--Whenever, during the 
     course of a lawful investigation involving possible 
     violations of the Federal securities laws by an issuer of 
     publicly traded securities or any of its directors, officers, 
     partners, controlling persons, agents, or employees, it shall 
     appear to the Commission that it is likely that the issuer 
     will make extraordinary payments (whether compensation or 
     otherwise) to any of the foregoing persons, the Commission 
     may petition a Federal district court for a temporary order 
     requiring the issuer to escrow, subject to court supervision, 
     those payments in an interest-bearing account for 45 days.
       ``(ii) Standard.--A temporary order shall be entered under 
     clause (i), only after notice and opportunity for a hearing, 
     unless the court determines that notice and hearing prior to 
     entry of the order would be impracticable or contrary to the 
     public interest.
       ``(iii) Effective period.--A temporary order issued under 
     clause (i) shall--

       ``(I) become effective immediately;
       ``(II) be served upon the parties subject to it; and
       ``(III) unless set aside, limited or suspended by a court 
     of competent jurisdiction, shall remain effective and 
     enforceable for 45 days.

       ``(iv) Extensions authorized.--The effective period of an 
     order under this subparagraph may be extended by the court 
     upon good cause shown for not longer than 45 additional days, 
     provided that the combined period of the order shall not 
     exceed 90 days.
       ``(B) Process on Determination of violations.--
       ``(i) Violations charged.--If the issuer or other person 
     described in subparagraph (A) is charged with any violation 
     of the Federal securities laws before the expiration of the 
     effective period of a temporary order under subparagraph (A) 
     (including any applicable extension period), the order shall 
     remain in effect, subject to court approval, until the 
     conclusion of any legal proceedings related thereto, and the 
     affected issuer or other person, shall have the right to 
     petition the court for review of the order.
       ``(ii) Violations not charged.--If the issuer or other 
     person described in subparagraph (A) is not charged with any 
     violation of the Federal securities laws before the 
     expiration of the effective period of a temporary order under 
     subparagraph (A) (including any applicable extension period), 
     the escrow shall terminate at the expiration of the 45-day 
     effective period (or the expiration of any extension period, 
     as applicable), and the disputed payments (with accrued 
     interest) shall be returned to the issuer or other affected 
     person.''.
       (b) Technical Amendment.--Section 21C(c)(2) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is 
     amended by striking ``This'' and inserting ``paragraph (1)''.

     SEC. 1104. AMENDMENT TO THE FEDERAL SENTENCING GUIDELINES.

       (a) Request for Immediate Consideration by The United 
     States Sentencing Commission.--Pursuant to its authority 
     under section 994(p) of title 28, United States Code, and in 
     accordance with this section, the United States Sentencing 
     Commission is requested to--
       (1) promptly review the sentencing guidelines applicable to 
     securities and accounting fraud and related offenses;
       (2) expeditiously consider the promulgation of new 
     sentencing guidelines or amendments to existing sentencing 
     guidelines to provide an enhancement for officers or 
     directors of publicly traded corporations who commit fraud 
     and related offenses; and
       (3) submit to Congress an explanation of actions taken by 
     the Sentencing Commission pursuant to paragraph (2) and any 
     additional policy recommendations the Sentencing Commission 
     may have for combating offenses described in paragraph (1).
       (b) Considerations in Review.--In carrying out this 
     section, the Sentencing Commission is requested to--
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of securities, pension, 
     and accounting fraud and the need for aggressive and 
     appropriate law enforcement action to prevent such offenses;
       (2) assure reasonable consistency with other relevant 
     directives and with other guidelines;
       (3) account for any aggravating or mitigating circumstances 
     that might justify exceptions, including circumstances for 
     which the sentencing guidelines currently provide sentencing 
     enhancements;
       (4) ensure that guideline offense levels and enhancements 
     for an obstruction of justice offense are adequate in cases 
     where documents or other physical evidence are actually 
     destroyed or fabricated;
       (5) ensure that the guideline offense levels and 
     enhancements under United States Sentencing Guideline 2B1.1 
     (as in effect on the date of enactment of this Act) are 
     sufficient for a fraud offense when the number of victims 
     adversely involved is significantly greater than 50;
       (6) make any necessary conforming changes to the sentencing 
     guidelines; and
       (7) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553 (a)(2) of title 
     18, United States Code.
       (c) Emergency Authority and Deadline For Commission 
     Action.--The United States Sentencing Commission is requested 
     to promulgate the guidelines or amendments provided for under 
     this section as soon as practicable, and in any event not 
     later than the 180 days after the date of enactment of this 
     Act, in accordance with the procedures sent forth in section 
     21(a) of the Sentencing Reform Act of 1987, as though the 
     authority under that Act had not expired.

     SEC. 1105. AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS 
                   FROM SERVING AS OFFICERS OR DIRECTORS.

       (a) 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:
       ``(f) Authority of the Commission 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) 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, or that is required to file reports 
     pursuant to section 15(d), if the conduct of that person 
     demonstrates unfitness to serve as an officer or director of 
     any such issuer.''.
       (b) 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 
     of the following:
       ``(f) Authority of the Commission 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) 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 the Securities Exchange Act of 
     1934, or that is required to file reports pursuant to section 
     15(d) of that Act, if the conduct of that person demonstrates 
     unfitness to serve as an officer or director of any such 
     issuer.''.

     SEC. 1106. INCREASED CRIMINAL PENALTIES UNDER SECURITIES 
                   EXCHANGE ACT OF 1934.

       Section 32(a) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78ff(a)) is amended--
       (1) by striking ``$1,000,000, or imprisoned not more than 
     10 years'' and inserting ``$5,000,000, or imprisoned not more 
     than 20 years''; and
       (2) by striking ``$2,500,000'' and inserting 
     ``$25,000,000''.

     SEC. 1107. RETALIATION AGAINST INFORMANTS.

       (a) In General.--Section 1513 of title 18, United States 
     Code, is amended by adding at the end the following:
       ``(e) Whoever knowingly, with the intent to retaliate, 
     takes any action harmful to any person, including 
     interference with the lawful employment or livelihood of any 
     person, for providing to a law enforcement officer any 
     truthful information relating to the commission or possible 
     commission of any Federal offense, shall be fined under this 
     title or imprisoned not more than 10 years, or both.''.
       And the Senate agree to the same.

     From the Committee on Financial Services, for consideration 
     of the House bill and the Senate amendments, and 
     modifications committed to conference:
     Michael G. Oxley,
     Richard H. Baker,
     Ed Royce,
     Robert W. Ney,
     Sue W. Kelly,
     Chris Cox,
     John J. LaFalce,
     Barney Frank,
     Paul E. Kanjorski,
     Maxine Waters,
     Provided that Mr. Shows is appointed in lieu of Ms. Waters 
     for consideration of section 11 of the House bill and section 
     305 of the Senate amendment, and modifications committed to 
     conference:
     Ronnie Shows,
     From the Committee on Education and the Workforce, for 
     consideration of sections 306 and 904 of the Senate 
     amendment, and modifications committed to conference:
     John Boehner,
     Sam Johnson,
     George Miller,
     From the Committee on Energy and Commerce, for consideration 
     of sections 108 and 109 of the Senate amendment, and 
     modifications committed to conference:
     Billy Tauzin,
     James Greenwood,
     John D. Dingell,
     From the Committee on the Judiciary, for consideration of 
     section 105 and titles VIII and IX of the Senate amendment, 
     and modifications committed to conference:
     F. James Sensenbrenner,
     Lamar Smith,
     John Conyers,
     From the Committee on Ways and Means, for consideration of 
     section 109 of the Senate amendment, and modifications 
     committed to conference:

[[Page 14383]]

     William Thomas,
     Jim McCrery,
     Charles b. Rangel,
                                Managers on the Part of the House.

     Paul Sarbanes,
     Christopher Dodd,
     Tim Johnson,
     Jack Reed,
     Patrick J. Leahy,
     Richard C. Shelby,
     Robert F. Bennett,
     Michael B. Enzi,
                               Managers on the Part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to the bill (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, submit the following joint statement 
     to the House and the Senate in explanation of the effect of 
     the action agreed upon by the managers and recommended in the 
     accompanying conference report:
       The Senate amendment struck all of the House bill after the 
     enacting clause and inserted a substitute text.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment. The differences between 
     the House bill, the Senate amendment, and the substitute 
     agreed to in conference are noted below, except for clerical 
     corrections, conforming changes made necessary by agreements 
     reached by the conferees, and minor drafting and clerical 
     changes.
       The Managers on the part of the House and the Senate met on 
     July 19 and July 24, 2002 (the House chairing), and 
     reconciled the differences between the House bill and the 
     Senate amendment.

     From the Committee on Financial Services, for consideration 
     of the House bill and the Senate amendments, and 
     modifications committed to conference:
     Michael G. Oxley,
     Richard H. Baker,
     Ed Royce,
     Robert W. Ney,
     Sue W. Kelly,
     Chris Cox,
     John J. LaFalce,
     Barney Frank,
     Paul E. Kanjorski,
     Maxine Waters,
     Provided that Mr. Shows is appointed in lieu of Ms. Waters 
     for consideration of section 11 of the House bill and section 
     305 of the Senate amendment, and modifications committed to 
     conference:
     Ronnie Shows,
     From the Committee on Education and the Workforce, for 
     consideration of sections 306 and 904 of the Senate 
     amendment, and modifications committed to conference:
     John Boehner,
     Sam Johnson,
     George Miller,
     From the Committee on Energy and Commerce, for consideration 
     of sections 108 and 109 of the Senate amendment, and 
     modifications committed to conference:
     Billy Tauzin,
     James Greenwood,
     John D. Dingell,
     From the Committee on the Judiciary, for consideration of 
     section 105 and titles VIII and IX of the Senate amendment, 
     and modifications committed to conference:
     F. James Sensenbrenner,
     Lamar Smith,
     John Conyers,
     From the Committee on Ways and Means, for consideration of 
     section 109 of the Senate amendment, and modifications 
     committed to conference:
     William Thomas,
     Jim McCrery,
     Charles B. Rangel,
                                Managers on the Part of the House.

     Paul Sarbanes,
     Christopher Dodd,
     Tim Johnson,
     Jack Reed,
     Patrick J. Leahy,
     Richard C. Shelby,
     Robert F. Bennett,
     Michael B. Enzi,
                               Managers on the Part of the Senate.