15 U.S.C. § 7215 — Untitled legal text

Page 2328 TITLE 15—COMMERCE AND TRADE § 7215 (b) Requirement Each covered issuer that is a foreign issuer and for which, during a non-inspection year with respect to the covered issuer, a registered public accounting firm described in subsection (i)(2)(A) of section 7214 of this title, as added by section 2 of this Act, has prepared an audit report shall disclose in each covered form filed by that issuer that covers such a non-inspection year— (1) that, during the period covered by the covered form, such a registered public ac- counting firm has prepared an audit report for the issuer; (2) the percentage of the shares of the issuer owned by governmental entities in the foreign jurisdiction in which the issuer is incor- porated or otherwise organized; (3) whether governmental entities in the ap- plicable foreign jurisdiction with respect to that registered public accounting firm have a controlling financial interest with respect to the issuer; (4) the name of each official of the Chinese Communist Party who is a member of the board of directors of— (A) the issuer; or (B) the operating entity with respect to the issuer; and (5) whether the articles of incorporation of the issuer (or equivalent organizing document) contains any charter of the Chinese Com- munist Party, including the text of any such charter. (Pub. L. 116–222, § 3, Dec. 18, 2020, 134 Stat. 1064.) Editorial Notes REFERENCES IN TEXT The Securities Exchange Act of 1934, referred to in subsec. (a)(3)(B)(ii), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of this title. For complete classification of this Act to the Code, see section 78a of this title and Tables. Section 2 of this Act, referred to in subsecs. (a)(4) and (b), means section 2 of Pub. L. 116–222. § 7215. Investigations and disciplinary pro- ceedings (a) In general The Board shall establish, by rule, subject to the requirements of this section, fair procedures for the investigation and disciplining of reg- istered 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 associ- ated 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 liabil- ities of accountants with respect thereto, in- cluding the rules of the Commission issued under this Act, or professional standards, re- gardless 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 appro- priate, the rules of the Board may— (A) require the testimony of the firm or of any person associated with a registered pub- lic 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 informa- tion 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 inves- tigation, and may inspect the books and records of such firm or associated person to verify the accuracy of any documents or in- formation supplied; (C) request the testimony of, and produc- tion 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 appro- priate notice, subject to the needs of the in- vestigation, 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 doc- ument in the possession of, any person, in- cluding any client of a registered public ac- counting firm, that the Board considers rel- evant 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 tes- tify, produce documents, or otherwise co- operate 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 ac- counting firm, or require the registered public accounting firm to end such asso- ciation; (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 7217(c) of this title. (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 En- forcement, as necessary to protect an ongo- ing Commission investigation. Page 2329 TITLE 15—COMMERCE AND TRADE § 7215 1 See References in Text note below. (B) Referral The Board may refer an investigation under this section— (i) to the Commission; (ii) to a self-regulatory organization, in the case of an investigation that concerns an audit report for a broker or dealer that is under the jurisdiction of such self-regu- latory organization; (iii) to any other Federal functional reg- ulator (as defined in section 6809 of this title), in the case of an investigation that concerns an audit report for an institution that is subject to the jurisdiction of such regulator; and (iv) 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 subparagraphs (B) and (C), all documents and information pre- pared 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 7214 of this title 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 ex- empt from disclosure, in the hands of an agency or establishment of the Federal Gov- ernment, under the Freedom of Information Act (5 U.S.C. 552a),1 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 confiden- tial 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 6809 of this title), other than the Commission, and the Director of the Federal Housing Finance Agency, with respect to an audit report for an institution subject to the jurisdiction of such regulator; (III) State attorneys general in connec- tion with any criminal investigation; (IV) any appropriate State regulatory authority; and (V) a self-regulatory organization, with respect to an audit report for a broker or dealer that is under the jurisdiction of such self-regulatory organization, each of which shall maintain such informa- tion as confidential and privileged. (C) Availability to foreign oversight authori- ties Without the loss of its status as confiden- tial and privileged in the hands of the Board, all information referred to in subparagraph (A) that relates to a public accounting firm that a foreign government has empowered a foreign auditor oversight authority to in- spect or otherwise enforce laws with respect to, may, at the discretion of the Board, be made available to the foreign auditor over- sight authority, if— (i) the Board finds that it is necessary to accomplish the purposes of this Act or to protect investors; (ii) the foreign auditor oversight author- ity provides— (I) such assurances of confidentiality as the Board may request; (II) a description of the applicable in- formation systems and controls of the foreign auditor oversight authority; and (III) a description of the laws and regu- lations of the foreign government of the foreign auditor oversight authority that are relevant to information access; and (iii) the Board determines that it is ap- propriate to share such information. (6) Immunity Any employee of the Board engaged in car- rying 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 Fed- eral 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 dis- ciplined, 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 per- son 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 pub- lic, unless otherwise ordered by the Board for good cause shown, with the consent of the par- ties to such hearing. (3) Supporting statement A determination by the Board to impose a sanction under this subsection shall be sup- ported by a statement setting forth— Page 2330 TITLE 15—COMMERCE AND TRADE § 7215 (A) each act or practice in which the reg- istered 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 de- termines has been violated; and (C) the sanction imposed, including a jus- tification for that sanction. (4) Sanctions If the Board finds, based on all of the facts and circumstances, that a registered public ac- counting 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 re- lating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect thereto, including the rules of the Commission issued under this Act, or professional standards, the Board may impose such disciplinary or remedial sanctions as it determines appropriate, subject to appli- cable limitations under paragraph (5), includ- ing— (A) temporary suspension or permanent revocation of registration under this sub- chapter; (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 connec- tion 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 nat- ural person or $15,000,000 for any other per- son; (E) censure; (F) required additional professional edu- cation or training; or (G) any other appropriate sanction pro- vided 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, in- cluding reckless conduct, that results in vio- lation of the applicable statutory, regu- latory, or professional standard; or (B) repeated instances of negligent con- duct, each resulting in a violation of the ap- plicable statutory, regulatory, or profes- sional standard. (6) Failure to supervise (A) In general The Board may impose sanctions under this section on a registered accounting firm or upon any person who is, or at the time of the alleged failure reasonably to supervise was, a supervisory person of such firm, if the Board finds that— (i) the firm has failed reasonably to su- pervise an associated person, either as re- quired by the rules of the Board relating to auditing or quality control standards, or otherwise, with a view to preventing viola- tions of this Act, the rules of the Board, the provisions of the securities laws relat- ing to the preparation and issuance of audit reports and the obligations and li- abilities of accountants with respect thereto, including the rules of the Com- mission 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 current or former supervisory person of a registered public accounting firm shall be deemed to have failed reasonably to super- vise any associated person for purposes of subparagraph (A), if— (i) there have been established in and for that firm procedures, and a system for ap- plying 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 as- sociated person; and (ii) such person has reasonably dis- charged the duties and obligations incum- bent upon that person by reason of such procedures and system, and had no reason- able 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 exer- cise 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, broker, or dealer 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 issuer, broker, or dealer in an accountancy or a financial management capacity, and for any issuer, broker, or dealer that knew, or in the exer- cise 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. Page 2331 TITLE 15—COMMERCE AND TRADE § 7216 (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 au- thority or any foreign accountancy licensing board with which such firm or person is li- censed or certified; and (C) the public (once any stay on the impo- sition 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 re- view, of any disciplinary action of the Board shall operate as a stay of any such disciplinary action, unless and until the Commission or- ders (summarily or after notice and oppor- tunity for hearing on the question of a stay, which hearing may consist solely of the sub- mission of affidavits or presentation of oral arguments) that no such stay shall continue to operate. (2) Expedited procedures The Commission shall establish for appro- priate cases an expedited procedure for consid- eration and determination of the question of the duration of a stay pending review of any disciplinary action of the Board under this subsection. (Pub. L. 107–204, title I, § 105, July 30, 2002, 116 Stat. 759; Pub. L. 110–289, div. A, title I, § 1161(h), July 30, 2008, 122 Stat. 2781; Pub. L. 111–203, title IX, §§ 929F(h), 981(b), (c), 982(f), (i), (j), July 21, 2010, 124 Stat. 1855, 1926, 1927, 1929–1931.) Editorial Notes REFERENCES IN TEXT This Act, referred to in subsecs. (b)(1), (5)(B)(ii), (C)(i), (6) and (c)(3)(B), (4), (6)(A), is Pub. L. 107–204, July 30, 2002, 116 Stat. 745, known as the Sarbanes-Oxley Act of 2002. For complete classification of this Act to the Code, see Tables. The Freedom of Information Act, referred to in sub- sec. (b)(5)(A), is section 552 of Title 5, Government Or- ganization and Employees. Section 552a of Title 5 is commonly known as the ‘‘Privacy Act’’. AMENDMENTS 2010—Subsec. (b)(4)(B)(ii) to (iv). Pub. L. 111–203, § 982(i), added cl. (ii) and redesignated former cls. (ii) and (iii) as (iii) and (iv), respectively. Subsec. (b)(5)(A). Pub. L. 111–203, § 981(c), substituted ‘‘subparagraphs (B) and (C)’’ for ‘‘subparagraph (B)’’. Subsec. (b)(5)(B)(ii)(V). Pub. L. 111–203, § 982(j), added subcl. (V). Subsec. (b)(5)(C). Pub. L. 111–203, § 981(b), added sub- par. (C). Subsec. (c)(6)(A). Pub. L. 111–203, § 929F(h)(1), sub- stituted ‘‘any person who is, or at the time of the al- leged failure reasonably to supervise was, a supervisory person’’ for ‘‘the supervisory personnel’’ in introduc- tory provisions. Subsec. (c)(6)(B). Pub. L. 111–203, § 929F(h)(2), in intro- ductory provisions, substituted ‘‘No current or former supervisory person’’ for ‘‘No associated person’’ and ‘‘any associated person’’ for ‘‘any other person’’. Subsec. (c)(7)(B). Pub. L. 111–203, § 982(f), in heading, inserted ‘‘, broker, or dealer’’ after ‘‘issuer’’ and, in text, substituted ‘‘a registered public accounting firm under this subsection’’ for ‘‘an issuer under this sub- section’’ and ‘‘any issuer, broker, or dealer’’ for ‘‘any issuer’’ in two places. 2008—Subsec. (b)(5)(B)(ii)(II). Pub. L. 110–289 inserted ‘‘and the Director of the Federal Housing Finance Agency,’’ after ‘‘Commission,’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. § 7216. Foreign public accounting firms (a) Applicability to certain foreign firms (1) In general Any foreign public accounting firm that pre- pares or furnishes an audit report with respect to any issuer, broker, or dealer, shall be sub- ject 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 pub- lic accounting firm that is organized and oper- ates under the laws of the United States or any State, except that registration pursuant to section 7212 of this title 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, brokers, or dealers, 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 subchapter. (b) Production of documents (1) Production by foreign firms If a foreign public accounting firm performs material services upon which a registered pub- lic accounting firm relies in the conduct of an audit or interim review, issues an audit report, performs audit work, or conducts interim re- views, the foreign public accounting firm shall— (A) produce the audit work papers of the foreign public accounting firm and all other documents of the firm related to any such audit work or interim review to the Com- mission or the Board, upon request of the Commission or the Board; and