[House Report 107-610]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-610

======================================================================



 
                       SARBANES-OXLEY ACT OF 2002

                                _______
                                

                 July 24, 2002.--Ordered to be printed

                                _______
                                

  Mr. Oxley, from the committee of conference, submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 3763]

    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 
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 
        registeredunder 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--
                            (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, 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 rulesof 
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 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 
        inparagraph (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.
    (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 Commissionissued 
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
                    (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.
            (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 suchstandard-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) 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 ofState 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--
            (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 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
                            ``(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 otherwiseavailable 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 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 
(asthat 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
                    ``(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 
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 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 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 reviewand 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 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'';
            (2) 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 andpunish 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 of 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 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:
                                   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.

                                
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