[Federal Register Volume 74, Number 116 (Thursday, June 18, 2009)]
[Notices]
[Pages 29005-29013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-14293]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60108; File No. PCAOB-2008-05]


Public Company Accounting Oversight Board; Notice of Filing of 
Proposed Rules on Succeeding to the Registration Status of a 
Predecessor Firm

June 12, 2009.
    Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002 (the 
``Act''), notice is hereby given that on August 4, 2008, the Public 
Company Accounting Oversight Board (the ``Board'' or the ``PCAOB'') 
filed with the Securities and Exchange Commission (the ``Commission'' 
or ``SEC'') the proposed rules described in Items I and II below, which 
items have been prepared by the Board. The Commission is publishing 
this notice to solicit comments on the proposed rules from interested 
persons.

I. Board's Statement of the Terms of Substance of the Proposed Rules

    On July 29, 2008, the Board adopted rules and a form related to 
succeeding to the registration status of a predecessor firm. New PCAOB 
Rules 2108-2109 and the instructions to a new form, Form 4, are set out 
below.

Section 2. Registration and Reporting

Part 1--Registration of Public Accounting Firms
* * * * *

2108. Succeeding to the Registration Status of a Predecessor

    (a) In the event that a registered public accounting firm changes 
its form of organization or changes the jurisdiction under the law of 
which it is organized, in circumstances that do not involve an 
acquisition or combination as described in paragraph (b) of this Rule, 
the entity in its new form shall succeed to the registration status of 
the predecessor if the new entity is a public accounting firm and files 
a Form 4 in accordance with Rule 2109.
    (b) In the event that a registered public accounting firm is 
acquired by an entity that is not a registered public accounting firm, 
or combines with any other entity or entities to form a new legal 
entity--
    (1) If the acquiring entity or the new entity is a public 
accounting firm that files a Form 4 in accordance with Rule 2109, and 
the answer provided to each subpart of Item 3.2.e of that Form 4 is 
``no,'' that entity shall succeed to the registration status of the 
registered firm;
    (2) If the acquiring entity or the new entity is a public 
accounting firm that files a Form 4 in accordance with Rule 2109, and 
the answer provided to any subpart of Item 3.2.e of that Form 4 is 
other than ``no,'' that entity shall not succeed to the registration 
status of the registered firm; provided, however, that if that entity 
represents on Form 4 that it has filed, or that it intends to file 
within 45 days of the effective date of the acquisition or combination, 
an application for registration on Form 1, then--
    (i) Subject to the qualifications in subparagraphs (ii), (iii), and 
(iv), that entity shall temporarily succeed to the registration status 
of the registered firm for a transitional period, but that registration 
will cease to be effective on the earlier of the date that the entity's 
application on Form 1 is approved or the date that is 91 days after the 
effective date of the acquisition or combination as reported on Form 4;
    (ii) Subject to the qualifications in subparagraphs (iii) and (iv), 
if the acquisition or combination took effect before the effective date 
of this rule, that entity shall temporarily succeed to the registration 
status of the registered firm for a transitional period, but that 
registration will cease to be effective on the earlier of the date that 
the entity's application on Form 1 is approved or the date that is 91 
days after the effective date of this rule;
    (iii) if the Board requests additional information from the entity 
pursuant to Rule 2106(c) with less than 60 days remaining in the 
original transitional period, the entity's temporary succession to 
registration status shall continue to the date that is 60 days after 
the date of the Board's request; and
    (iv) If, after the original transition period has been extended 
pursuant to subparagraph (iii), the Board makes any further requests 
for additional information from the entity pursuant to Rule 2106(c), 
the Board may in its discretion extend the temporary succession to 
registration status for such finite period as the Board shall specify.
    (c) Subject to paragraph (d) of this rule, a public accounting firm 
that results from events described in paragraphs (a) or (b) of this 
rule shall not, in the absence of compliance with the provisions of 
Rule 2109, succeed to the registration status of a predecessor 
registered public accounting firm.
    (d) Notwithstanding paragraph (c) of this rule, if a public 
accounting firm's failure to comply with the provisions of Rule 2109 is 
solely a failure concerning the timeliness of the submission, the firm 
may request leave to file Form 4 out of time by indicating and 
supporting that request in accordance with the instructions to the 
form. The Board will evaluate any such request in light of the relevant 
facts and circumstances and the public interest and may, in its 
discretion, grant or deny the request. If the Board grants leave to 
file the form out of time, the Form 4 shall be deemed filed and the 
provisions of paragraphs (a) and (b) shall apply as if the Form 4 had 
been timely filed. A Form 4 that has been submitted out of time may be 
withdrawn by the firm at any time before the Board has approved or 
disapproved the request for leave to file out of time.

2109. Procedure for Succeeding to the Registration Status of a 
Predecessor

    (a) A public accounting firm seeking to succeed to the registration 
status of a predecessor registered public accounting firm pursuant to 
the provisions of Rule 2108 must do so by filing a Form 4--
    (1) No later than the 14th day after the change or business 
combination takes effect, if the change or business combination takes 
effect on or after [insert effective date of this rule]; or
    (2) No later than [insert date 14 days after effective date of this 
rule], if the change or business combination took effect before [insert 
effective date of this rule].
    (b) A public accounting firm filing a Form 4 must do so by filing 
the Form 4 in accordance with the instructions to that form. Unless 
directed otherwise by the Board, a public accounting firm filing a Form 
4 must file the Form 4 and exhibits thereto electronically with the 
Board through the Board's Web-based system.
    (c) A Form 4 shall be deemed to be filed on the date that the 
public accounting firm submits a Form 4 in accordance with Rule 2109(b) 
that includes the signed certification required in Part V of Form 4, 
provided, however, that any report so submitted after the applicable 
deadline as prescribed in paragraph (a) of this rule, shall not be 
deemed filed unless and until the Board, pursuant to Rule 2108(d), 
grants leave to file the Form 4 out of time.
    (d) The provisions of Rule 2204 concerning signatures, shall apply 
to each signature required by Form 4 as if it were a signature to a 
report on Form 3. Rule 2205 concerning amendments, and Rule 2207 
concerning assertions of conflicts with non-U.S. laws, shall apply to 
any submission on Form 4 as if the submission were a report on Form.

[[Page 29006]]

    Form 4--Succeeding to Registration Status of Predecessor

General Instructions

    1. Purpose of This Form. Effective [insert effective date of Rule 
2109], this Form must be used to submit information, representations, 
and affirmations to the Board, pursuant to Rule 2109, by a public 
accounting firm that seeks to succeed to the registration status of a 
predecessor firm in circumstances described in Rule 2108.
    2. Defined Terms. The definitions in the Board's rules apply to 
this Form. Italicized terms in the instructions to this Form are 
defined in the Board's rules. In addition, as used in the instructions 
to this Form, the term ``the Firm'' means the public accounting firm 
that is submitting this Form to the Board, and the term ``the 
predecessor firm'' means the registered public accounting firm 
identified in Item 1.1.a of the Form.
    3. Submission of this Form. Unless otherwise directed by the Board, 
the Firm must submit this Form, and all exhibits to this Form, to the 
Board electronically by completing the Web-based version of this Form 
available on the Board's Web site. The Firm must use the predecessor 
firm's user ID and password to access the system and submit the Form. 
In the event of a transaction involving the combination of multiple 
registered public accounting firms, the Firm must access the system 
using only the user ID and password of the firm specifically identified 
in Item 1.1.a, and not those of any other registered public accounting 
firm.
    4. When This Form Should Be Submitted and When It Is Considered 
Filed. To succeed to the registration status of the predecessor firm 
pursuant to the provisions of Rule 2108(a) or (b), the Firm must 
provide the information and representations required by this Form, in 
accordance with the instructions to this Form, and must file the Form 
no later than the 14th day after the effective date of the change in 
form of organization, change in jurisdiction of organization, or 
business combination. Different timing requirements apply with respect 
to events that occurred before [insert effective date of Rule 2109]. 
See Rule 2109(a)(2). Form 4 is considered filed when the Firm has 
submitted to the Board, through the Board's Web-based reporting system, 
a Form 4 that includes the signed certification required in Part V of 
Form 4, provided, however, that any Form 4 so submitted after the 
applicable filing deadline shall not be deemed filed unless and until 
the Board, pursuant to Rule 2108(d), grants leave to file the Form 4 
out of time.
    5. Seeking Leave To File This Form Out of Time. To request leave to 
file Form 4 out of time, pursuant to the provisions of Rule 2108(d), 
the Firm must file the request on Form 4 and must attach as Exhibit 
99.5 a detailed statement describing why, despite the passage of time 
since the event described on the Form 4, the Board should permit the 
Firm to succeed to the registration status of the predecessor firm. Any 
Form 4 that has been submitted out of time, and as to which a Board 
decision on whether to allow the form to be filed is pending, may be 
withdrawn by accessing the pending submission in the Board's Web-based 
system and selecting the ``Withdraw'' option.
    6. Completing the Form. The Firm must complete Parts I, II, IV and 
V of this Form. Part III should be completed to the extent applicable, 
as described more fully in the instructions to Part II of the Form.
    7. Amendments to This Form. Amendments shall not be submitted to 
update information into a Form 4 that was correct at the time the Form 
was submitted, but only to correct information that was incorrect at 
the time the Form was submitted or to provide information that was 
omitted from the Form and was required to be provided at the time the 
Form was submitted. When submitting a Form 4 to amend an earlier 
submitted Form 4, the Firm must supply not only the corrected or 
supplemental information, but must include in the amended Form 4 all 
information, affirmations, and certifications that were required to be 
included in the original Form 4. The Firm may access the originally 
filed Form 4 through the Board's Web-based system and make the 
appropriate amendments without needing to re-enter all other 
information. (Note that, pursuant to Rule 2109(d), the provisions of 
Rule 2205 concerning amendments apply to any submission on this Form as 
if the submission were a report on Form 3.)

    Note: The Board will designate an amendment to a report on Form 
4 as a report on ``Form 4/A.''


    Note: Any change to a Form 4 that was originally submitted out 
of time, and as to which a Board decision on whether to allow the 
form to be filed is pending, shall not be treated as an amendment. 
To make a change to any such pending Form 4 submission, the Firm 
must access the pending submission in the Board's Web-based system, 
select the ``Withdraw and Replace'' option, and submit a new 
completed Form 4 in place of the previously pending submission. The 
certification required in Part V of the new submission must be 
executed specifically for the replacement version of the Form and 
dated accordingly.

    8. Rules Governing This Form. In addition to these instructions, 
the rules contained in Part 2 of Section 2 of the Board's rules govern 
this Form. Please read these rules and the instructions carefully 
before completing this Form.
    9. Requests for Confidential Treatment. The Firm may, by marking 
the Form in accordance with the instructions provided, request 
confidential treatment of any information submitted in Exhibit 99.3 or 
Exhibit 99.5 of this Form that has not otherwise been publicly 
disclosed and that either contains information reasonably identified by 
the Firm as proprietary information or that is protected from public 
disclosure by applicable laws related to confidentiality of 
proprietary, personal, or other information. See Rule 2300. If the Firm 
requests confidential treatment, it must identify the information in 
Exhibit 99.3 or Exhibit 99.5 that it desires to keep confidential, and 
include, as Exhibit 99.1 to this Form, an exhibit that complies with 
the requirements of Rule 2300(c)(2). The Board will determine whether 
to grant confidential treatment requests on a case-by-case basis. If 
the Firm fails to include Exhibit 99.1, or includes an Exhibit 99.1 
that fails to comply with Rule 2300(c)(2), the request for confidential 
treatment may be denied solely on the basis of that failure.
    10. Assertions of Conflicts With Non-U.S. Law. If the Firm is a 
foreign registered public accounting firm, the Firm may, unless 
otherwise directed by the Board pursuant to Rule 2207(e), decline to 
provide the affirmation required by Item 4.1 of this Form and any 
answer required by Item 3.2.e of this Form if doing so would constitute 
a violation of non-U.S. law by the Firm and the Firm proceeds in 
accordance with Rule 2207. (Note that, pursuant to Rule 2109(d), the 
provisions of Rule 2207 apply to any submission on this Form as if the 
submission were a report on Form 3.) If the firm withholds the 
affirmation or answer, the Firm must indicate, in accordance with the 
instructions in the relevant Part of the Form, that it has done so.
    11. Language. Information submitted as part of this Form, including 
any exhibit to this Form, must be in the English language.

[[Page 29007]]

Part I--Identity of the Firm and Contact Persons

Item 1.1 Names of Firm and Predecessor Registered Public Accounting 
Firm
    a. State the legal name of the registered public accounting firm to 
whose registration status the Firm seeks to succeed.

    Note: The name provided in Item 1.1.a should be the legal name 
of the registered public accounting firm as last reported to the 
Board on Form 1 or Form 3. This is the firm referred to in this Form 
as ``the predecessor firm.'' In accessing and submitting this Form 
through the Board's Web-based system, the Firm must use the 
predecessor firm's user ID and password.

    b. State the legal name of the Firm filing this Form.

    Note: The name provided in Item 1.1.b will be the name under 
which the Firm is registered with the Board if this Form is filed in 
accordance with Rule 2109.

    c. If different than the name provided in Item 1.1.b, state the 
name or names under which the Firm issues or intends to issue audit 
reports.
Item 1.2 Contact Information of the Firm
    a. State the physical address (and, if different, mailing address) 
of the Firm's headquarters office.
    b. State the telephone number and facsimile number of the Firm 's 
headquarters office. If available, state the Web site address of the 
Firm.
Item 1.3 Primary Contact and Signatory
    State the name, business title, physical business address (and, if 
different, business mailing address), business telephone number, 
business facsimile number, and business e-mail address of a partner or 
authorized officer of the Firm who will serve as the Firm's primary 
contact with the Board, including for purposes of this Form 4, any 
annual reports filed on Form 2, and any special reports filed on Form 
3.

Part II--General Information Concerning the Filing of This Form

Item 2.1 Reason for Filing This Form
    Indicate, by checking the box for either Item a or Item b below, 
the reason the Firm is filing this Form. Then proceed to the Parts and 
Items of this Form indicated parenthetically for the relevant item and 
provide the information described there. Provide responses only to 
those Parts and Items of the Form specifically indicated for the event 
or events that the Firm identifies in this Part II as the reason for 
filing this Form. (For example, if the Form is being submitted because 
the Firm has changed its form of organization, check the box for Item 
2.1.a, and complete only Item 3.1 and Parts IV and V of the Form. 
Complete Item 2.2 or Item 2.3 if applicable.)
    a. There has been a change in the Firm's form of organization, or 
the Firm has changed the jurisdiction under the law of which it is 
organized. (Complete Item 3.1, Part IV, and Part V; complete Item 2.2 
or Item 2.3 if applicable.)
    b. There has been an acquisition of a registered public accounting 
firm by an entity that was not a registered public accounting firm at 
the time of the acquisition, or a registered public accounting firm has 
combined with another entity or other entities to form a new legal 
entity. (Complete Item 3.2, Part IV, and Part V; complete Item 2.2 or 
Item 2.3 if applicable.)
Item 2.2 Request for Leave To File This Form Out of Time
    If this Form is not submitted in accordance with Rule 2109(b) on or 
before the filing deadline set by Rule 2109(a), the Firm may request 
leave to file this Form 4 out of time by checking the box for this 
Item, completing this Form 4 as is otherwise required, and providing, 
as Exhibit 99.5 to this Form, a description of the reason(s) the Form 
was not timely filed and a statement of the grounds on which the Firm 
asserts that the Board should grant leave to file the Form out of time.

    Note: Requests for leave to file Form 4 out of time are not 
automatically granted. See Rule 2108(d).

Item 2.3 Amendments
    If this is an amendment to a Form 4 previously filed with the 
Board--
    a. Indicate, by checking the box corresponding to this item, that 
this is an amendment; and
    b. Identify the specific Item numbers of this Form (other than this 
Item 2.3) as to which the Firm's response has changed from that 
provided in the most recent Form 4 or amended Form 4 filed by the Firm 
with respect to the event reported on this Form.

Part III--Changes in the Firm

Item 3.1 Changes in Form of Organization or in Relevant Jurisdiction
    If this Form 4 is being submitted in connection with a change in 
the Firm's form of organization or a change in the jurisdiction under 
the law of which the Firm is organized--
    a. State the Firm's current (i.e., after the change in legal form 
or jurisdiction) legal form of organization;
    b. Identify the jurisdiction under the law of which the Firm is 
organized currently (i.e., after the change in legal form or 
jurisdiction);
    c. State the date that the change took effect;
    d. Affirm that, after the change reported or described in this Item 
3.1, the Firm is a public accounting firm under substantially the same 
ownership as the predecessor firm;

    Note: Neither the Act nor Board rules include any provision by 
which a registered public accounting firm may, in effect, transfer 
its Board registration to another entity. Rule 2108(a), in 
conjunction with this Form, allows the succession of registration 
status in circumstances in which a registered public accounting firm 
changes its legal form of organization while remaining under 
substantially the same ownership. For purposes of this Item, the 
Firm is considered to be under substantially the same ownership as 
the predecessor firm if a majority of the persons who held an equity 
ownership interest in the predecessor also constitute a majority of 
the persons who hold an equity ownership interest in the Firm.

    e. If, in connection with the change described in this Item 3.1, 
the Firm has obtained, or will practice under, a license or 
certification number, authorizing it to engage in the business of 
auditing or accounting, that is different from any such license or 
certification number previously reported to the Board by the 
predecessor firm, provide as to each such license--
    1. The name of the issuing State, agency, board, or other 
authority;
    2. The number of the license or certification; and
    3. The date the license or certification took effect;
    f. If, in connection with the change described in this Item 3.1, 
any license or certification that authorized the predecessor firm to 
engage in the business of auditing or accounting has ceased to be 
effective or has become subject to any conditions or contingencies 
other than conditions or contingencies imposed on all firms engaged in 
the business of auditing or accounting in the jurisdiction, provide, as 
to each such license--
    1. The name of the issuing State, agency, board, or other 
authority;
    2. The number of the license or certification; and
    3. The date that the authorization ceased to be effective or became 
subject to conditions or contingencies.
Item 3.2 Acquisitions of, or Combinations Involving, A Registered 
Public Accounting Firm
    a. If this Form 4 is being submitted in connection with a 
transaction concerning which a person who holds

[[Page 29008]]

an equity ownership interest in the Firm, or is employed by the Firm, 
can certify the points set out in Item 3.2.b. and Exhibit 99.4,--
    1. Provide the name of each entity, other than the predecessor 
firm, that was involved in the transaction and that was a registered 
public accounting firm immediately before the transaction, and as to 
each such entity--
    (i) Affirm that the entity has filed with the Board a request for 
leave to withdraw from registration on Form 1-WD; and
    (ii) State the date that the entity filed Form 1-WD;
    2. Provide the name of each entity, including any acquiror, that 
was involved in the transaction and that was not a registered public 
accounting firm immediately before the transaction;
    3. Provide the date that the transaction took effect; and
    4. Provide a brief description of the nature of the transaction.
    b. Provide as Exhibit 99.4 to this Form, a statement in the form 
set out below, signed by a person who, immediately before the 
transaction, was an officer of, or held an equity ownership interest 
in, the predecessor firm and who now either holds an equity ownership 
interest in, or is employed by, the Firm. The statement must be 
submitted on behalf of the Firm. Exhibit 99.4 must include a signature 
that appears in typed form in the electronic submission and a 
corresponding manual signature retained by the Firm in accordance with 
Rule 2109(d). The signature must be accompanied by the signer's current 
title, the signer's title immediately before the event described in 
Item 3.2.a, the date of signature, and the signer's business mailing 
address, business telephone number, business facsimile number, and 
business e-mail address. Other than the insertion of the relevant 
names, Exhibit 99.4 must be in the exact following words--
    On behalf of [name of the Firm], I certify that (1) I was an 
officer of, or held an equity ownership interest in, [name of 
predecessor firm] immediately before the transaction described in Item 
3.2.a of the Form 4 to which this exhibit is attached; (2) immediately 
before that transaction [name of predecessor firm] was a registered 
public accounting firm; (3) as part of that transaction, a majority of 
the persons who held equity ownership interests in [name of predecessor 
firm] obtained equity ownership interests in, or became employed by, 
[name of the Firm]; (4) [name of predecessor firm] intended that [name 
of the Firm] succeed to the Board registration status of [name of 
predecessor firm] to the extent permitted by the Board's rules; and (5) 
[name of predecessor firm] is no longer a public accounting firm.
    c. If, in connection with the transaction described in Item 3.2.a, 
the Firm has obtained, or will practice under, a license or 
certification number, authorizing it to engage in the business of 
auditing or accounting, that is different from any such license or 
certification number previously reported to the Board by the 
predecessor firm, provide, as to each such license--
    1. The name of the issuing State, agency, board or other authority;
    2. The number of the license or certification; and
    3. The date the license or certification took effect.
    d. If, in connection with the transaction described in Item 3.2.a, 
any license or certification that authorized the predecessor firm to 
engage in the business of auditing or accounting has ceased to be 
effective or has become subject to any conditions or contingencies 
other than conditions or contingencies imposed on all firms engaged in 
the business of auditing or accounting in the jurisdiction, provide, as 
to each such license--
    1. The name of the issuing State, agency, board, or other 
authority;
    2. The number of the license or certification; and
    3. The date that the authorization ceased to be effective or became 
subject to conditions or contingencies.
    e. Provide a ``yes'' or ``no'' answer to each of the following 
questions--
    1. Is there identified in Item 3.2.a.2 any entity that, if it were 
filing an application for registration on Form 1 on the date of the 
certification in Part V of this Form, would have to provide an 
affirmative response to Item 5.1.a of Form 1 in order to file a 
complete and truthful Form 1?

    Note: In considering whether an affirmative response would be 
required to Item 5.1.a of Form 1, the Firm should take into account 
the guidance provided by question number 33 in Frequently Asked 
Questions Regarding Registration with the Board, PCAOB Release No. 
2003-011A (Nov. 13, 2003).

    2. Is there identified in Item 3.2.a.2 any entity that (i) issued 
an audit report with respect to an issuer on or after October 22, 2003 
(or, if the entity is a non-U.S. entity, July 19, 2004), while not 
registered with the Board, and (ii) has never had an application for 
registration on Form 1 approved by the Board?
    3. Is the Firm operating without holding any license or 
certification issued by a State, agency, board, or other authority 
authorizing the Firm to engage in the business of auditing or 
accounting?

    Note: If the Firm answers ``yes'' to any question in Item 3.2.e 
or asserts as to any of those questions that non-U.S. law prohibits 
it from providing an answer, the Firm cannot succeed outright to the 
registration of the predecessor. If this Form 4 is submitted in 
accordance with Rule 2109, however, the Firm will temporarily 
succeed to the registration of the predecessor for a transitional 
period as described in Rule 2108(b)(2) as long as the Firm makes the 
representation required in Item 3.2.f below. If the Firm answers 
``yes'' to any question in Item 3.2.e or asserts as to any of those 
questions that non-U.S. law prohibits it from providing an answer 
but fails to make the representation required in Item 3.2.f, this 
Form 4 will not be accepted for filing and the Firm will not succeed 
to the predecessor's registration even on a temporary basis. See 
Rule 2108(b)(2).

    f. If the Firm answered ``yes'' to any question in Item 3.2.e or 
asserts as to any of those questions that non-U.S. law prohibits it 
from providing an answer, affirm, by checking the box corresponding to 
the appropriate item, that one of the following statements is true--
    1. The Firm has filed an application for registration on Form 1 on 
or after the date provided in Item 3.2.a.3.
    2. The Firm intends to file an application for Registration on Form 
1 no later than 45 days after the date provided in Item 3.2.a.3.

Part IV--Continuing Obligations

Item 4.1 Continuing Consent to Cooperate
Affirm that--
    a. The Firm consents to cooperate in and comply with any request 
for testimony or the production of documents made by the Board in 
furtherance of its authority and responsibilities under the Sarbanes-
Oxley Act of 2002;
    b. The Firm has secured from each of its associated persons, and 
agrees to enforce as a condition of each such person's continued 
employment by or other association with the Firm, a consent indicating 
that the associated person consents to cooperate in and comply with any 
request for testimony or the production of documents made by the Board 
in furtherance of its authority under the Sarbanes-Oxley Act of 2002, 
and that the associated person understands and agrees that such consent 
is a condition of his or her continued employment by or other 
association with the Firm; and
    c. The Firm understands and agrees that cooperation and compliance, 
as

[[Page 29009]]

described in Item 4.1.a., and the securing and enforcing of consents 
from its associated persons as described in Item 4.1.b., is a condition 
to the continuing effectiveness of the registration of the Firm with 
the Board.

    Note: The affirmation in Item 4.1.b. shall not be understood to 
include an affirmation that the Firm has secured such consents from 
any associated person that is a registered public accounting firm.


    Note: The affirmation in Item 4.1.b. shall not be understood to 
include an affirmation that the Firm has secured such consents from 
any associated person that is a foreign public accounting firm in 
circumstances where that associated person asserts that non-U.S. law 
prohibits it from providing the consent, so long as the Firm 
possesses in its files documents relating to the associated person's 
assertion about non-U.S. law that would be sufficient to satisfy the 
requirements of subparagraphs (2) through (4) of Rule 2207(c) if 
that associated person were a registered public accounting firm 
filing a Form 2 and withholding this affirmation. This exception to 
the affirmation in Item 4.1.b. does not relieve the Firm of its 
obligation to enforce cooperation and compliance with Board demands 
by any such associated person as a condition of continued 
association with the Firm.


    Note: If the Firm is a foreign registered public accounting 
firm, the affirmations in Item 4.1 that relate to associated persons 
shall be understood to encompass every accountant who is a 
proprietor, partner, principal, shareholder, officer, or manager of 
the Firm and who provided at least ten hours of audit services for 
any issuer during the reporting period.

Item 4.2 Continuing Responsibility to the Board for Previous Conduct
    Affirm that, for purposes of the Board's authority with respect to 
registered public accounting firms, including but not limited to the 
authority to require reporting of information and the authority to 
impose disciplinary sanctions, the Firm either has retained or assumes 
responsibility for the conduct of any predecessor registered public 
accounting firm before the change or business combination reported on 
this Form took effect.

    Note: As used in Item 4.2 the term ``predecessor registered 
public accounting firm,'' means (1) in circumstances not involving a 
transaction described in Item 3.2, the predecessor firm and (2) in 
circumstances involving a transaction described in Item 3.2, each 
registered public accounting firm that was involved in the business 
combination.


    Note: The continuing responsibility in Item 4.2 includes, among 
other things, responsibility for reporting information on Form 2 and 
events on Form 3. Thus, for example, if a registered public 
accounting firm experienced a Form 3 reportable event before the 
event that is the subject of this Form, the Firm, as successor, has 
the obligation to report that event on Form 3, and bears 
responsibility for any failure by any predecessor to have filed a 
timely Form 3 to report the matter.


    Note: The Board's rules do not require that any entity retain or 
assume responsibility as set forth above. In the absence of an 
affirmation that it retains or assumes responsibility for such 
conduct at least for purposes of the Board's authority, however, an 
entity cannot succeed to the Board registration status of any 
predecessor entity. See Rule 2108.

Part V--Certification of the Firm

Item 5.1 Signature of Partner or Authorized Officer
    This Form must be signed on behalf of the Firm by an authorized 
partner or officer of the Firm including, in accordance with Rule 
2109(d), both a signature that appears in typed form within the 
electronic submission and a corresponding manual signature retained by 
the Firm. The signer must certify that--
    a. The signer is authorized to sign this Form on behalf of the 
Firm;
    b. The signer has reviewed this Form;
    c. Based on the signer's knowledge, this Form does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading; and
    d. Either--
    1. Based on the signer's knowledge, the Firm has not failed to 
include in this Form any information or affirmation that is required by 
the instructions to this Form, with respect to the event or events 
being described on this Form, or
    2. Based on the signer's knowledge--
    (A) The Firm is a foreign public accounting firm and has not failed 
to include in this Form any information or affirmation that is required 
by the instructions to this Form other than an affirmation required by 
Item 4.1 and/or an answer to Item 3.2.e.; and
    (B) The Firm asserts that it is prohibited by non-U.S. law from 
providing any such withheld affirmation or response to the Board on 
this Form and, with respect to each such withheld affirmation or 
response, the Firm has made the efforts described in PCAOB Rule 2207(b) 
and has in its files the materials described in PCAOB Rule 2207(c).
    The signature must be accompanied by the signer's title, the 
capacity in which the signer signed the Form, the date of signature, 
and the signer's business mailing address, business telephone number, 
business facsimile number, and business e-mail address.

Part VI--Exhibits

    To the extent applicable under the foregoing instructions, each 
report must be accompanied by the following exhibits:

Exhibit 99.1 Request for Confidential Treatment
Exhibit 99.3 Materials Required by Rule 2207(c)(2)-(4)--Submit Only as 
an Exhibit to an Amended Form 4 in Response to a Request Made Pursuant 
to Rule 2207(d)
Exhibit 99.4 Acknowledgment Concerning Registration Status in Certain 
Transactions
Exhibit 99.5 Statement in Support of Request for Leave To File Form 4 
Out of Time.

II. Board's Statement of the Purpose of, and Statutory Basis for, the 
Proposed Rule

    In its filing with the Commission, the Board included statements 
concerning the purpose of, and basis for, the proposed rule. The text 
of these statements may be examined at the places specified in Item IV 
below. The Board has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Board's Statement of the Purpose of, and Statutory Basis for, the 
Proposed Rules

(a) Purpose
    Under Section 102(a) of the Sarbanes-Oxley Act of 2002 and PCAOB 
Rule 2100, a public accounting firm must be registered with the PCAOB 
in order to prepare or issue audit reports for public companies or to 
play a substantial role in the preparation or furnishing of such audit 
reports. To become registered, a public accounting firm files an 
application for registration on PCAOB Form 1, which the Board may 
approve or disapprove. The proposed rules identify the circumstances in 
which a firm may succeed to the registration status of a predecessor 
registered firm, without filing a new Form 1, and provide a mechanism 
for the firm to do so.
    The rules afford the opportunity for continuity of registration in 
two general categories of circumstances: (1) Changes related to a 
firm's legal form of organization or the jurisdiction in which it is 
organized, and (2) transactions in which a registered firm is acquired 
by an unregistered entity or combines with other entities to form a new 
legal entity. The events to which the rules apply are

[[Page 29010]]

events for which a firm plans, not unanticipated events to which a firm 
reacts. The rules are designed to facilitate a firm's ability to factor 
into its planning, and to predict with certainty, whether and how 
continuity of registration can be maintained.
    The rules provide for a form the firm must file (Form 4), set a 
deadline for filing the form, and require certain information and 
representations in the form. If the firm files the form within the 
required timeframe, provides the required representations, and 
certifies that all required information is included, then continuity of 
registration is automatic, without the need for separate Board action. 
The rules and form also build in safeguards to ensure that the Form 1 
process is not circumvented in circumstances where that process is more 
appropriate than Form 4 succession.
    To obtain continuing effectiveness of an existing registration, the 
firm must acknowledge the continuity of, and commit to honor, certain 
obligations that accompany the registration status. Those obligations 
fall into two categories: continuing consent to cooperate with the 
Board and continuing responsibility to the Board for the conduct of 
predecessor registered firms.
    With respect to circumstances in which a registered firm is 
acquired by an unregistered entity, or when a registered firm combines 
with other entities to form a new legal entity, the proposed Form 4 
requires, among other things, information that determines whether 
succession to the predecessor's registration is permanent or temporary. 
Based on this information, succession may be outright and permanent or 
may only be temporary for a transition period intended to allow to the 
firm to seek registration through the Form 1 process.
    For succession to registration to take effect automatically upon 
filing under the rules, Form 4 must be filed within 14 days after the 
effective date of the change in legal form or other event. The rules 
make some allowance for late filing. A firm that fails to file Form 4 
within the 14-day period may submit a late Form 4 and request that the 
Board grant leave to file the form out of time. In a late submission, 
the firm should include as an exhibit to the form a statement in 
support of its request for leave to file out of time. If the Board 
grants the request and allows the form to be filed, the firm will 
succeed to the predecessor's registration.
    The proposed rules would take effect 60 days after Securities and 
Exchange Commission approval.
(b) Statutory Basis
    The statutory basis for the proposed rule is Title I of the Act.

B. Board's Statement on Burden on Competition

    The Board does not believe that the proposed rules will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rules provide a 
registration succession mechanism that firms may elect to use but are 
not required to use.

C. Board's Statement on Comments on the Proposed Rules Received from 
Members, Participants or Others

    The Board released the proposed rules and form instructions for 
public comment in Release No. 2006-005 (May 23, 2006). A copy of 
Release No. 2006-005 and the comment letters received in response to 
the PCAOB's request for comment are available on the PCAOB's Web site 
at http://www.pcaobus.org. The Board received five written comment 
letters. The Board has clarified and modified certain aspects of the 
proposed rules and form instructions in response to the comments it 
received, as discussed below.
    Commenters addressed the Form 4 item that requires a Form 4 filer 
to affirm that it retains or assumes responsibility for the conduct of 
predecessor registered firms for purposes of the Board's authority. 
Commenters expressed concern that the affirmation might erode otherwise 
valid legal defenses in contexts such as criminal or private civil 
proceedings, and suggested that the Board should make clear that no 
such result is intended. The Board reiterates what it said in proposing 
the requirement for comment: The affirmation of continuing 
responsibility for a predecessor's conduct is not intended to create 
any new liability, nor is it intended to affect the legal consequences 
of the transaction with respect to any person or entity other than the 
Board. As between the firm and the Board, however, the Board views the 
affirmation as indispensable if a firm wishes to make use of the Form 4 
process. In an effort to reduce the possibility of misunderstanding 
about the intended scope, the Board has made slight changes to the 
wording of Item 4.2--such as changing the heading to specify that the 
item is about continuing responsibility ``to the Board,'' and removing 
the broad adjective ``legal'' in describing the nature of the 
responsibility being retained or assumed--but the Board is adopting the 
substance of the requirement essentially as proposed.
    One commenter expressed the view that a successor firm should not 
be precluded from assuming a predecessor firm's registration status 
just because less than a majority of its predecessor's owners remained 
with the successor firm. In the Board's view, that suggestion is 
unworkable for a process intended to provide for automatic succession 
upon the satisfaction of bright line criteria. Without supplemental 
information and the intervention of judgment, the Board could not 
provide for succession in those circumstances without running a risk 
that more than one ``successor'' entity might lay claim to the same 
predecessor's registration.
    One commenter suggested that the Board should define 
``acquisition'' in this context, and raised questions concerning 
whether, to be an ``acquisition'' for which Form 4 succession is 
available, the transaction must involve acquisition of the predecessor 
firm's assets or a substantial portion thereof. For Form 4 succession 
to be available, the Board does not require that the transaction 
include anything other than what is described in the Exhibit 99.4 
certification: a majority of the equity owners in a predecessor 
registered firm have become equity owners or employees of an 
unregistered firm, and the predecessor registered firm ceases to be a 
public accounting firm. For clarity on this point, the wording of Item 
3.2.a. has been revised to refer to an acquisition of ``any portion 
of'' a registered public accounting firm, though Form 4 succession 
following any such acquisition is available only if all of the Exhibit 
99.4 criteria are satisfied.
    The Exhibit 99.4 certification also includes a statement that the 
predecessor registered firm intended for the successor firm to succeed 
to its registration status. One commenter questioned the 
appropriateness of allowing a single individual to certify that the 
predecessor intended such succession, and expressed concern about the 
Board acting on such a certification by someone who may only have had a 
marginal role in the predecessor registered firm. As proposed and 
adopted, however, the required certification would be included in a 
filing that cannot be made except by the successor firm, which cannot 
make the filing unless a majority of the predecessor's owners are part 
of that successor firm. In those circumstances, it is not necessary to 
more specifically limit which of the predecessor's former owners or 
officers must execute the required certification.

[[Page 29011]]

    In the context of a combination of firms, Form 4 succession is 
available only if the predecessor registered firm ceases to exist as a 
public accounting firm. One commenter questioned this requirement and 
suggested that a firm should be able to spin off its issuer audit 
business, including its registration status, to another firm and still 
remain a public accounting firm. The Board is not precluding the 
possibility that a firm can spin off its issuer audit business and 
still remain a public accounting firm; rather, the Board is identifying 
this criterion--whether the predecessor continues to exist as a public 
accounting firm--as relevant to whether registration status can move to 
the new firm through the Form 4 process or whether that firm can obtain 
registration status only through the Form 1 process.
    If the predecessor registered firm continues to exist as the same 
legal entity that registered with the Board and continues to be engaged 
in the practice of public accounting, then the transaction suggested by 
the commenter would involve an existing public accounting firm--an 
entity which can legally be registered--conveying its registration to 
another public accounting firm, a transaction that the Board views as 
fundamentally inappropriate. Accordingly, in that circumstance, the 
firm to which the predecessor's issuer audit practice moved could not 
use the Form 4 process but would need to apply for registration on Form 
1--which it could do even before the relevant transaction takes effect.
    In contrast, if the legal entity that originally registered ceases 
to exist as a public accounting firm, then it cannot legally be a 
registered public accounting firm. For that entity's registration 
status to move with elements of that entity into another entity, 
through the Form 4 process, does not raise the same concerns about 
transferability of registration from one existing public accounting 
firm to another.
    One commenter questioned the requirement to file a Form if a firm 
involved in the transaction would need to answer ``yes'' on the Form 1 
disciplinary history question if filing a Form 1. The commenter 
suggested that this requirement could be punitive, especially for large 
registered firms that combine with smaller firms. Item 3.2.e. of Form 
4, however, does not pose any significant risk of that sort. If a large 
registered firm acquires a smaller unregistered firm, the large 
registered firm would merely be required to report that in its annual 
report on Form 2, without resort to the Form 4 process. Alternatively, 
if a large registered firm were involved in a transaction that did lead 
to a Form 4 filing, the disciplinary histories of that firm and its 
associated persons would be irrelevant to Item 3.2.e. because the large 
firm was already registered at the time of the transaction. Item 3.2.e. 
relates only to disciplinary history information of entities (and their 
associated persons) that were not already registered at the time of the 
transaction.
    Commenters suggested that the proposed 90-day limit on the 
temporary transition period (for firms that may not succeed permanently 
to the predecessor's registration) was too short and too inflexible. 
They noted that the Board has 45 days to act on an application, and 
also noted that the Board could ask for additional information, thereby 
restarting the 45-day clock and potentially pushing a registration 
decision out beyond the 90-day period. One commenter suggested revising 
the proposal so that the temporary registration status would continue 
until the Board makes a final decision on the Form 1. Another suggested 
revising the proposal to give the Board flexibility to extend the 
temporary registration status in situations where the Board does not 
take final action on the Form 1 within the 90 days.
    The Board does not believe it would be appropriate to adopt a rule 
providing for a temporary registration period that continues until the 
Board acts on the Form 1, since firms could then keep the temporary 
registration status in place by not filing Form 1 or by delaying a 
response to a Board request for additional information on the 
application. The Board, however, sees the value in a measure of 
flexibility on this point. Accordingly, in Rule 2108(b)(2), the Board 
has retained the proposed 90 days as the initial transition period but 
has also added certain qualifications. If the Board formally requests 
additional information from the firm with less than 60 days remaining 
in the initial 90-day period, the temporary registration will continue 
to the date that is 60 days after the date of the Board's request. The 
effect will be that a firm has 15 days to respond to the Board's 
request if the firm wants to stay on track to keep its temporary 
registration until Board action on the Form 1. If the Board makes 
follow-up requests for information, the Board has the discretion to 
extend the temporary registration to a later date. Depending on the 
circumstances, however, the Board might, in making a follow-up request, 
conclude that further extension of the temporary registration is 
unwarranted, and could communicate that to the firm in the second 
request.
    One commenter suggested that the Board should adopt procedures by 
which a firm that anticipates that a successor will need to file a new 
Form 1 could review the relevant facts with the Board's staff before 
the transaction to determine whether the staff sees significant 
obstacles to approving the successor's application. In the Board's 
view, however, to the extent it is appropriate for the staff to review 
information relevant to a prospective Form 1 filing, the staff may 
already do so without the need for special procedures.
    One commenter addressed the requirement that, in the context of 
more than two firms combining, any registered firm other than the firm 
whose registration is intended to continue, must, before Form 4 is 
filed, file a request to withdraw from registration. The commenter 
expressed concern that there may be a registration gap for the 
predecessor firm that files the Form 1-WD prior to the transaction if 
the withdrawal is granted prior to the close of the transaction. The 
representation concerning the filing of a 1-WD, however, does not apply 
to the ``predecessor firm,'' but only to other registered firms, if 
any, that are merging into the filing entity as part of the 
transaction. In connection with any Form 4 filing, the firm designated 
as the ``predecessor firm'' should not seek leave to withdraw from 
registration. In addition, in transactions involving additional 
registered firms, the Form 1-WD filings need not occur far in advance 
of the Form 4 filing. The Form 4 requirements can be satisfied even if 
the relevant Form 1-WD filings occur immediately before the Form 4 
filing.
    One commenter noted that changes in licenses and certifications may 
occur after the filing of a Form 4 and suggested that the Board should 
expressly state that such changes may be described in an amendment to 
Form 4. Because a firm succeeds to registration automatically upon the 
Form 4 being filed, however, the firm immediately becomes subject to 
the same annual and special reporting requirements as any other 
registered firm. Accordingly, a license change that occurs after the 
filing of the Form 4 should be reported on Form 3 in accordance with 
Rule 2203.
    For succession to registration to take effect automatically upon 
filing under the rules, Form 4 must be filed within 14 days after the 
effective date of the change in legal form or other event. Commenters 
expressed a view that 14 days is too short a period, and suggested

[[Page 29012]]

that it was insufficient time for non-U.S. firms to evaluate the impact 
of non-U.S. law in a particular case or to obtain consents, waivers, 
and legal opinions relating to potential legal conflicts. More 
generally, one commenter noted that 14 days does not allow sufficient 
time after the event for a firm to assess its reporting obligations and 
complete the form. Two commenters suggested expanding the 14-day period 
to a 45-day period.
    The Board has considered these comments but has decided to adopt 
the 14-day deadline. Given the purpose of the filing--avoiding breaks 
in registration status--the Board believes that the rule should require 
filing of the form in as short a period as reasonably possible, so that 
any questions about the entity's registration status are kept to as 
narrow a period as possible. In addition, the events giving rise to a 
Form 4 are events for which firms plan, and such planning can encompass 
prompt filing of the relatively short and simple Form 4.
    Even so, the rules make some allowance for late filing. A firm that 
fails to file Form 4 within the 14-day period may submit a late Form 4 
and request that the Board grant leave to file the form out of time. In 
a late submission, the firm should include as an exhibit to the form a 
statement in support of its request for leave to file out of time. If 
the Board grants the request and allows the form to be filed, the firm 
will succeed to the predecessor's registration (either outright or for 
the transitional period described above).
    One commenter sought clarification of a firm's registration status 
during a period in which a Form 4 is pending with a request for leave 
to file out of time, suggesting that it is unclear whether the firm can 
issue audit reports while the request is pending. As discussed in the 
proposing release, a firm submitting a late Form 4 should make no 
assumption about whether the Board will allow it to be filed. 
Accordingly, during the period that the request is pending with the 
Board, a firm should not assume that it is a registered public 
accounting firm and, therefore, should not assume that it may issue 
audit reports. The rule's provision for late submissions is not 
principally intended as an accommodation to firms, but is intended to 
afford the Board the opportunity to allow Form 4 succession, despite a 
late filing, when doing so would be consistent with the public 
interest. Eventual favorable Board action on the request would 
effectively confer registered status on the firm back to the date of 
the transaction that is the subject of the Form 4 filing (just as with 
a timely filed Form 4), but unfavorable Board action would mean that 
the entity filing the Form 4 was never registered.
    One commenter suggested that non-U.S. firms might also sometimes 
face legal obstacles to answering the Item 3.2.e. yes-no questions that 
determine whether succession is permanent or temporary. The Board has 
determined to allow non-U.S. firms to withhold those answers on legal 
conflict grounds. The consequence of doing so, however, will be the 
same as if the firm had supplied a ``no'' answer: the succession 
afforded by the Form 4 process will only be for a transitional period 
to allow the firm an opportunity to seek registration through the Form 
1 process.
    Form 4 limits the categories of information for which a firm can 
request confidential treatment. Confidential treatment requests that 
have no genuine basis in law needlessly distract Board resources and 
delay the availability of information to the public. In the case of 
Form 4, the basic, nonpersonal, and nonproprietary nature of the 
required information leads the Board to foreclose confidential 
treatment requests for almost all of the items in the form.
    The Board encouraged commenters to comment on whether the proposal 
overlooked actual or realistically foreseeable legal requirements to 
maintain the confidentiality of information. Commenters who addressed 
the point did so only in vague terms without providing any specific 
basis for concluding that the proposal overlooked any potentially 
applicable protection. One commenter stated generally that certain 
information required by Form 4 may need to be kept confidential under 
non-U.S. law or by the terms of an agreement between predecessor and 
successor entities. The commenter did not identify what information in 
Form 4 might fall into that category and did not provide an example of 
the type of non-U.S. law that might protect its confidentiality. 
Moreover, in the absence of relevant law, an agreement between private 
parties to keep information confidential does not in itself satisfy the 
confidential treatment criteria described in Rule 2300(b)(1). The 
commenter also expressed slightly more focused concern about the 
protection of ``information regarding the acquisition,'' but did not 
specify what information, among the very basic acquisition-related 
information required by Form 4, could be considered confidential or 
proprietary.
    Another commenter raised potential confidentiality concerns about 
Item 3.2.e.1. As adopted, that Item asks whether the acquisition or 
combination involves any previously unregistered entity that, if it 
were filing an application for registration on Form 1, would have to 
provide an affirmative response to Item 5.1.a, which asks about the 
existence of certain specified disciplinary histories. The commenter 
suggested that indicating whether a firm would have to answer ``yes'' 
to that question might lead others to draw unfavorable conclusions that 
could expose the firm to an increased risk of liability claims. Whether 
that is true, though, is a separate question from whether that ``yes'' 
answer is information that is protected from disclosure by applicable 
law. The commenter did not suggest how that would be the case. 
Moreover, as a practical matter, any reader of the Form 4 would 
recognize that a firm's request for confidential treatment of its 
answer to Item 3.2.e.1. would mean that its answer was ``yes.''
    In weighing these comments, the Board views as relevant the fact 
that Form 4 is not a required filing. While the Board does not view its 
optional nature as justification for dispensing with the possibility of 
confidential treatment, the Board does not believe that the comments on 
this point warrant any change from what was proposed.

III. Date of Effectiveness of the Proposed Rules and Timing for 
Commission Action

    Within 60 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Board consents, the Commission will:
    (a) By order approve such proposed rules; or
    (b) Institute proceedings to determine whether the proposed rules 
should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed 
rules are consistent with the requirements of Title I of the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/pcaob.shtml); or
     Send an e-mail to [email protected]. Please include 
File

[[Page 29013]]

Number PCAOB 2008-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number PCAOB 2008-05. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/pcaob/shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule that are filed 
with the Commission, and all written communications relating to the 
proposed rule between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
PCAOB. All comments received will be posted without change; we do not 
edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. PCAOB-2008-05 and should be 
submitted on or before July 20, 2009.

    By the Commission.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-14293 Filed 6-17-09; 8:45 am]
BILLING CODE 8010-01-P