[Federal Register Volume 88, Number 64 (Tuesday, April 4, 2023)]
[Notices]
[Pages 20002-20004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06961]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97223; File No. PCAOB-2023-01]


Public Company Accounting Oversight Board; Notice of Filing of 
Proposed Rules on Amendments to Board Rule Governing Determinations 
Under the Holding Foreign Companies Accountable Act

March 30, 2023.
    Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002 
(``Sarbanes-Oxley'' or the ``Act''), notice is hereby given that on 
March 29, 2023, the Public Company Accounting Oversight Board (the 
``Board'' or the ``PCAOB'') filed with the Securities and Exchange 
Commission (the ``Commission'' or the ``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 March 28, 2023, the Board adopted amendments to PCAOB Rule 6100, 
Board Determinations Under the Holding Foreign Companies Accountable 
Act (collectively, the ``proposed rules''). The text of the proposed 
rules appears in Exhibit A to the SEC Filing Form 19b-4 and is 
available on the Board's website at https://pcaobus.org/about/rules-rulemaking/rulemaking-dockets/docket-050 and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Board included statements 
concerning the purpose of, and basis for, the proposed rules. The text 
of these statements may be examined at the places specified in Item IV 
below. The Board has prepared summaries, set forth

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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
    Sarbanes-Oxley mandates that the Board inspect registered public 
accounting firms and investigate possible statutory, rule, and 
professional standards violations committed by those firms and their 
associated persons. That mandate applies with equal force to the 
Board's oversight of registered firms in the United States and in 
foreign jurisdictions.\1\
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    \1\ See, e.g., Section 106(a)(1) of Sarbanes-Oxley, 15 U.S.C. 
7216(a)(1).
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    In December 2020, recognizing the obstacles the Board has faced 
when attempting to conduct inspections and investigations in certain 
foreign jurisdictions, Congress enacted the Holding Foreign Companies 
Accountable Act (``HFCAA''), which amended Sarbanes-Oxley.\2\ The HFCAA 
required that the Board determine whether it is unable to inspect or 
investigate completely registered public accounting firms located in a 
foreign jurisdiction because of a position taken by one or more 
authorities in that jurisdiction.\3\ The HFCAA also mandates that, 
after the Board makes such a determination, the Commission shall 
require covered issuers \4\ that retain such firms to make certain 
disclosures in their annual reports and, eventually, if certain 
conditions persist, shall prohibit trading in those issuers' 
securities.\5\
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    \2\ Public Law 116-222, 134 Stat. 1063 (Dec. 18, 2020).
    \3\ See Section 104(i)(2)(A) of Sarbanes-Oxley, 15 U.S.C. 
7214(i)(2)(A).
    \4\ See Section 104(i)(1)(A) of Sarbanes-Oxley, 15 U.S.C. 
7214(i)(1)(A) (defining ``covered issuer'').
    \5\ See generally Holding Foreign Companies Accountable Act 
Disclosure, SEC Release No. 34-93701 (Dec. 2, 2021).
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    Following public comment, the Board adopted PCAOB Rule 6100, Board 
Determinations Under the Holding Foreign Companies Accountable Act, to 
establish a framework for the Board to make its determinations under 
the HFCAA.\6\ Rule 6100 establishes the manner of the Board's 
determinations; the factors the Board will evaluate and the documents 
and information it will consider when assessing whether a determination 
is warranted; the form, public availability, effective date, and 
duration of such determinations; and the process by which the Board 
will reaffirm, modify, or vacate any such determinations.
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    \6\ See Rule Governing Board Determinations Under the Holding 
Foreign Companies Accountable Act, PCAOB Rel. No. 2021-004 (Sept. 
22, 2021); see also Public Company Accounting Oversight Board; Order 
Granting Approval of Proposed Rule Governing Board Determinations 
Under the Holding Foreign Companies Accountable Act, SEC Release No. 
34-93527 (Nov. 4, 2021).
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    On December 29, 2022, the President signed into law the 
Consolidated Appropriations Act, 2023 (``the 2023 Appropriations 
Act''),\7\ amending certain provisions of Sarbanes-Oxley that relate to 
Board determinations under the HFCAA. As a result, the Board is 
amending Rule 6100 to conform to the 2023 Appropriations Act's 
amendment of Section 104(i)(2)(A)(ii) of Sarbanes-Oxley.\8\
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    \7\ See Public Law 117-328 (Dec. 29, 2022).
    \8\ The other amendments to Sarbanes-Oxley in the 2023 
Appropriations Act relate to the timetable for trading prohibitions. 
See Section 301 of Division AA of the 2023 Appropriations Act 
(reducing, from three years to two years, the timetable for trading 
prohibitions set forth in Section 104(i)(3) of Sarbanes-Oxley). 
Because Rule 6100 does not address the timetable for such 
prohibitions, no related changes to Rule 6100 are necessary.
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    Amendments to Rule 6100(a). Consistent with the HFCAA,\9\ Rule 
6100(a), as originally adopted, provided that a Board determination 
regarding its inability to inspect or investigate completely a 
registered public accounting firm could be based only on positions 
taken by authorities in the foreign jurisdiction where the firm was 
headquartered (for purposes of Rule 6100(a)(1)) or in a foreign 
jurisdiction where the firm had an office (for purposes of Rule 
6100(a)(2)).\10\ Therefore, if the Board were unable to inspect or 
investigate a firm completely because of a position taken by an 
authority in a foreign jurisdiction where the firm neither was 
headquartered nor had an office, a determination under the HFCAA as to 
the firm could not be made.
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    \9\ See HFCAA Sec.  2(i)(2)(A)(ii), 15 U.S.C. 7214(i)(2)(A)(ii) 
(providing that a Board determination as to a registered firm can be 
based only on a position taken by an authority in ``the foreign 
jurisdiction described in clause (i),'' that is, the foreign 
jurisdiction where a branch or office of the firm is located).
    \10\ See PCAOB Rule 6100(a)(1) (pre-amendment) (``The Board may 
determine that it is unable to inspect or investigate completely 
registered public accounting firms headquartered in a foreign 
jurisdiction because of a position taken by one or more authorities 
in that jurisdiction.'') (emphasis added); PCAOB Rule 6100(a)(2) 
(pre-amendment) (``The Board may determine that it is unable to 
inspect or investigate completely a registered public accounting 
firm that has an office that is located in a foreign jurisdiction 
because of a position taken by one or more authorities in that 
jurisdiction.'') (emphasis added).
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    The 2023 Appropriations Act amends Section 104(i)(2)(A)(ii) of 
Sarbanes-Oxley to allow the Board to make a determination as to a firm 
located in one foreign jurisdiction based on a position taken by an 
authority in a different foreign jurisdiction.\11\ The Board is 
amending Rule 6100(a)(1) and (a)(2) to effectuate that change by 
replacing ``in that jurisdiction'' with ``in a foreign jurisdiction'' 
at the end of both provisions.
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    \11\ See Section 301 of Division AA of the 2023 Appropriations 
Act (striking ``the foreign jurisdiction described in clause (i)'' 
and inserting ``a foreign jurisdiction'' in Section 104(i)(2)(A)(ii) 
of Sarbanes-Oxley).
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    Amendments to Rule 6100(c) and (d). Relatedly, because future Board 
determinations could implicate two foreign jurisdictions--one where the 
firm is located and another whose authorities are taking positions that 
render the Board unable to inspect or investigate completely--the Board 
is amending Rule 6100(c) and (d) to eliminate potentially ambiguous or 
confusing references to ``the foreign jurisdiction.'' Specifically, the 
Board is deleting ``in the foreign jurisdiction or any political 
subdivision thereof'' in Rule 6100(c)(1); is replacing ``any relevant 
authority in the foreign jurisdiction'' with ``any relevant foreign 
authority'' in Rule 6100(c)(2); is replacing ``the foreign 
authority's'' with ``any relevant foreign authority's'' in Rule 
6100(c)(3); and is deleting ``located in the foreign jurisdiction'' in 
Rule 6100(d).
    Effective Date. The Board determined that the amendments to Rule 
6100 take effect upon approval by the Commission. The effective date 
takes into consideration the statutory amendments to Sarbanes-Oxley and 
the limited, conforming nature of the changes to Rule 6100.
(b) Statutory Basis
    The statutory basis for the proposed rules is Title I of the Act.

B. Board's Statement on Burden on Competition

    Not applicable. The amendments to Rule 6100 reflect the statutory 
amendment to Section 104(i)(2)(A)(ii) of Sarbanes-Oxley.

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

    The Board did not solicit written comments on the proposed rules. 
The amendments to Rule 6100 reflect the statutory amendment to Section 
104(i)(2)(A)(ii) of Sarbanes-Oxley.\12\
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    \12\ The amendments to Rule 6100 do not require ``mandatory 
audit firm rotation or a supplement to the auditor's report in which 
the auditor would be required to provide additional information 
about the audit and the financial statements'' of issuers, nor do 
they impose any ``additional requirements'' on auditors. Section 
103(a)(3)(C) of Sarbanes-Oxley. Accordingly, the Board has concluded 
that Section 103(a)(3)(C) of Sarbanes-Oxley does not apply to this 
rulemaking.

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

    Within 45 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 or disapprove 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 email to [email protected]. Please include 
PCAOB-2023-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Vanessa Countryman, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to PCAOB-2023-01. This file number should 
be included on the subject line if email 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 website (http://www.sec.gov/rules/pcaob.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rules that are filed with the 
Commission, and all written communications relating to the proposed 
rules 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 website viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549-1090, on official business days between the hours of 10:00 a.m. 
and 3:00 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 charge; 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 PCAOB-2023-01 and should be submitted on or 
before April 25, 2023.

    For the Commission by the Office of the Chief Accountant.\13\
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    \13\ 17 CFR 200.30-11(b)(1) and (3).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-06961 Filed 4-3-23; 8:45 am]
BILLING CODE 8011-01-P