15 U.S.C. § 7217 — Commission oversight of the Board

Page 2332 TITLE 15—COMMERCE AND TRADE § 7217 (B) be subject to the jurisdiction of the courts of the United States for purposes of enforcement of any request for such docu- ments. (2) Other production Any registered public accounting firm that relies, in whole or in part, on the work of a foreign public accounting firm in issuing an audit report, performing audit work, or con- ducting an interim review, shall— (A) produce the audit work papers of the foreign public accounting firm and all other documents related to any such work in re- sponse to a request for production by the Commission or the Board; and (B) secure the agreement of any foreign public accounting firm to such production, as a condition of the reliance by the reg- istered public accounting firm on the work of that foreign public accounting firm. (c) Exemption authority The Commission, and the Board, subject to the approval of the Commission, may, by rule, regu- lation, or order, and as the Commission (or Board) determines necessary or appropriate in the public interest or for the protection of inves- tors, either unconditionally or upon specified terms and conditions exempt any foreign public accounting firm, or any class of such firms, from any provision of this Act or the rules of the Board or the Commission issued under this Act. (d) Service of requests or process (1) In general Any foreign public accounting firm that per- forms work for a domestic registered public accounting firm shall furnish to the domestic registered public accounting firm a written ir- revocable consent and power of attorney that designates the domestic registered public ac- counting firm as an agent upon whom may be served any request by the Commission or the Board under this section or upon whom may be served any process, pleadings, or other pa- pers in any action brought to enforce this sec- tion. (2) Specific audit work Any foreign public accounting firm that per- forms material services upon which a reg- istered public accounting firm relies in the conduct of an audit or interim review, issues an audit report, performs audit work, or, per- forms interim reviews, shall designate to the Commission or the Board an agent in the United States upon whom may be served any request by the Commission or the Board under this section or upon whom may be served any process, pleading, or other papers in any ac- tion brought to enforce this section. (e) Sanctions A willful refusal to comply, in whole in or in part, with any request by the Commission or the Board under this section, shall be deemed a vio- lation of this Act. (f) Other means of satisfying production obliga- tions Notwithstanding any other provisions of this section, the staff of the Commission or the Board may allow a foreign public accounting firm that is subject to this section to meet pro- duction obligations under this section through alternate means, such as through foreign coun- terparts of the Commission or the Board. (g) Definition In this section, the term ‘‘foreign public ac- counting firm’’ means a public accounting firm that is organized and operates under the laws of a foreign government or political subdivision thereof. (Pub. L. 107–204, title I, § 106, July 30, 2002, 116 Stat. 764; Pub. L. 111–203, title IX, §§ 929J, 982(g), July 21, 2010, 124 Stat. 1859, 1930.) Editorial Notes REFERENCES IN TEXT This Act, referred to in subsecs. (a), (c), and (e), 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. AMENDMENTS 2010—Subsec. (a)(1). Pub. L. 111–203, § 982(g)(1), sub- stituted ‘‘issuer, broker, or dealer’’ for ‘‘issuer’’. Subsec. (a)(2). Pub. L. 111–203, § 982(g)(2), substituted ‘‘issuers, brokers, or dealers’’ for ‘‘issuers’’. Subsec. (b). Pub. L. 111–203, § 929J(1), added subsec. (b) and struck out former subsec. (b) which related to deemed consent to production of audit workpapers by foreign and domestic firms. Subsecs. (d) to (g). Pub. L. 111–203, § 929J(2), (3), added subsecs. (d) to (f) and redesignated former subsec. (d) as (g). 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. § 7217. Commission oversight of the Board (a) General oversight responsibility The Commission shall have oversight and en- forcement authority over the Board, as provided in this Act. The provisions of section 78q(a)(1) of this title, and of section 78q(b)(1) of this title shall apply to the Board as fully as if the Board were a ‘‘registered securities association’’ for purposes of those sections 78q(a)(1) and 78q(b)(1). (b) Rules of the Board (1) Definition In this section, the term ‘‘proposed rule’’ means any proposed rule of the Board, and any modification of any such rule. (2) Prior approval required No rule of the Board shall become effective without prior approval of the Commission in accordance with this section, other than as provided in section 7213(a)(3)(B) of this title with respect to initial or transitional stand- ards. (3) Approval criteria The Commission shall approve a proposed rule, if it finds that the rule is consistent with the requirements of this Act and the securities Page 2333 TITLE 15—COMMERCE AND TRADE § 7217 laws, or is necessary or appropriate in the pub- lic interest or for the protection of investors. (4) Proposed rule procedures The provisions of paragraphs (1) through (3) of section 78s(b) of this title shall govern the proposed rules of the Board, as fully as if the Board were a ‘‘registered securities associa- tion’’ for purposes of that section 78s(b), ex- cept that, for purposes of this paragraph— (A) the phrase ‘‘consistent with the re- quirements of this chapter and the rules and regulations thereunder applicable to such organization’’ in section 78s(b)(2) of this title shall be deemed to read ‘‘consistent with the requirements of title I of the Sarbanes-Oxley Act of 2002, and the rules and regulations issued thereunder applicable to such organi- zation, or as necessary or appropriate in the public interest or for the protection of inves- tors’’; and (B) the phrase ‘‘otherwise in furtherance of the purposes of this chapter’’ in section 78s(b)(3)(C) of this title shall be deemed to read ‘‘otherwise in furtherance of the pur- poses of title I of the Sarbanes-Oxley Act of 2002’’. (5) Commission authority to amend rules of the Board The provisions of section 78s(c) of this title shall govern the abrogation, deletion, or addi- tion to portions of the rules of the Board by the Commission as fully as if the Board were a ‘‘registered securities association’’ for pur- poses of that section 78s(c), except that the phrase ‘‘to conform its rules to the require- ments of this chapter and the rules and regula- tions thereunder applicable to such organiza- tion, or otherwise in furtherance of the pur- poses of this chapter’’ in section 78s(c) of this title shall, for purposes of this paragraph, be deemed to read ‘‘to assure the fair administra- tion of the Public Company Accounting Over- sight Board, conform the rules promulgated by that Board to the requirements of title I of the Sarbanes-Oxley Act of 2002, or otherwise fur- ther the purposes of that Act, the securities laws, and the rules and regulations thereunder applicable to that Board’’. (c) Commission review of disciplinary action taken by the Board (1) Notice of sanction The Board shall promptly file notice with the Commission of any final sanction on any registered public accounting firm or on any associated person thereof, in such form and containing such information as the Commis- sion, by rule, may prescribe. (2) Review of sanctions The provisions of sections 78s(d)(2) and 78s(e)(1) of this title shall govern the review by the Commission of final disciplinary sanctions imposed by the Board (including sanctions im- posed under section 7215(b)(3) of this title for noncooperation in an investigation of the Board), as fully as if the Board were a self-reg- ulatory organization and the Commission were the appropriate regulatory agency for such or- ganization for purposes of those sections 78s(d)(2) and 78s(e)(1), except that, for purposes of this paragraph— (A) section 7215(e) of this title (rather than that section 78s(d)(2)) shall govern the ex- tent to which application for, or institution by the Commission on its own motion of, re- view of any disciplinary action of the Board operates as a stay of such action; (B) references in that section 78s(e)(1) to ‘‘members’’ of such an organization shall be deemed to be references to registered public accounting firms; (C) the phrase ‘‘consistent with the pur- poses of this chapter’’ in that section 78s(e)(1) shall be deemed to read ‘‘consistent with the purposes of this chapter and title I of the Sarbanes-Oxley Act of 2002’’; (D) references to rules of the Municipal Se- curities Rulemaking Board in that section 78s(e)(1) shall not apply; and (E) the reference to section 78s(e)(2) of this title shall refer instead to section 7217(c)(3) of this title. (3) Commission modification authority The Commission may enhance, modify, can- cel, reduce, or require the remission of a sanc- tion imposed by the Board upon a registered public accounting firm or associated person thereof, if the Commission, having due regard for the public interest and the protection of investors, finds, after a proceeding in accord- ance with this subsection, that the sanction— (A) is not necessary or appropriate in fur- therance of this Act or the securities laws; or (B) is excessive, oppressive, inadequate, or otherwise not appropriate to the finding or the basis on which the sanction was im- posed. (d) Censure of the Board; other sanctions (1) Rescission of Board authority The Commission, by rule, consistent with the public interest, the protection of inves- tors, and the other purposes of this Act and the securities laws, may relieve the Board of any responsibility to enforce compliance with any provision of this Act, the securities laws, the rules of the Board, or professional stand- ards. (2) Censure of the Board; limitations The Commission may, by order, as it deter- mines necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this Act or the securities laws, censure or im- pose limitations upon the activities, func- tions, and operations of the Board, if the Com- mission finds, on the record, after notice and opportunity for a hearing, that the Board— (A) has violated or is unable to comply with any provision of this Act, the rules of the Board, or the securities laws; or (B) without reasonable justification or ex- cuse, has failed to enforce compliance with any such provision or rule, or any profes- sional standard by a registered public ac- counting firm or an associated person there- of. Page 2334 TITLE 15—COMMERCE AND TRADE § 7218 (3) Censure of Board members; removal from office The Commission may, as necessary or appro- priate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this Act or the securities laws, re- move from office or censure any person who is, or at the time of the alleged misconduct was, a member of the Board, if the Commission finds, on the record, after notice and oppor- tunity for a hearing, that such member— (A) has willfully violated any provision of this Act, the rules of the Board, or the secu- rities laws; (B) has willfully abused the authority of that member; or (C) without reasonable justification or ex- cuse, has failed to enforce compliance with any such provision or rule, or any profes- sional standard by any registered public ac- counting firm or any associated person thereof. (Pub. L. 107–204, title I, § 107, July 30, 2002, 116 Stat. 765; Pub. L. 111–203, title IX, § 929F(i), July 21, 2010, 124 Stat. 1855.) Editorial Notes REFERENCES IN TEXT This Act and the Sarbanes-Oxley Act of 2002, referred to in text, are Pub. L. 107–204, July 30, 2002, 116 Stat. 745. Title I of the Act is classified generally to this sub- chapter. For complete classification of this Act to the Code, see Tables. CONSTITUTIONALITY For information regarding the constitutionality of certain provisions of this section, see the Table of Laws Held Unconstitutional in Whole or in Part by the Su- preme Court on the Constitution Annotated website, constitution.congress.gov. AMENDMENTS 2010—Subsec. (d)(3). Pub. L. 111–203 substituted ‘‘any person who is, or at the time of the alleged misconduct was, a member’’ for ‘‘any member’’ in introductory pro- visions. 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. § 7218. Accounting standards (a) Omitted (b) Commission authority The Commission shall promulgate such rules and regulations to carry out section 77s(b) of this title as it deems necessary or appropriate in the public interest or for the protection of inves- tors. (c) No effect on Commission powers Nothing in this Act, including this section and the amendment made by this section, shall be construed to impair or limit the authority of the Commission to establish accounting prin- ciples or standards for purposes of enforcement of the securities laws. (d) Study and report on adopting principles- based accounting (1) Study (A) In general The Commission shall conduct a study on the adoption by the United States financial reporting system of a principles-based ac- counting system. (B) Study topics The study required by subparagraph (A) shall include an examination of— (i) the extent to which principles-based accounting and financial reporting exists in the United States; (ii) the length of time required for change from a rules-based to a principles- based financial reporting system; (iii) the feasibility of and proposed meth- ods by which a principles-based system may be implemented; and (iv) a thorough economic analysis of the implementation of a principles-based sys- tem. (2) Report Not later than 1 year after July 30, 2002, the Commission shall submit a report on the re- sults of the study required by paragraph (1) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Com- mittee on Financial Services of the House of Representatives. (Pub. L. 107–204, title I, § 108, July 30, 2002, 116 Stat. 768.) Editorial Notes REFERENCES IN TEXT This Act, referred to in subsec. (c), 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. CODIFICATION Section is comprised of section 108 of Pub. L. 107–204. Subsec. (a) of section 108 of Pub. L. 107–204 amended section 77s of this title. § 7219. Funding (a) In general The Board, and the standard setting body des- ignated pursuant to section 77s(b) of this title, shall be funded as provided in this section. (b) Annual budgets The Board and the standard setting body re- ferred to in subsection (a) shall each establish a budget for each fiscal year, which shall be re- viewed and approved according to their respec- tive internal procedures not less than 1 month prior to the commencement of the fiscal year to which the budget pertains (or at the beginning of the Board’s first fiscal year, which may be a short fiscal year). The budget of the Board shall be subject to approval by the Commission. The budget for the first fiscal year of the Board shall be prepared and approved promptly following the appointment of the initial five Board mem- bers, to permit action by the Board of the orga- nizational tasks contemplated by section 7211(d) of this title.