15 U.S.C. § 7219 — Funding

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. Page 2335 TITLE 15—COMMERCE AND TRADE § 7219 (c) Sources and uses of funds (1) Recoverable budget expenses The budget of the Board (reduced by any reg- istration or annual fees received under section 7212(e) of this title for the year preceding the year for which the budget is being computed), and all of the budget of the standard setting body referred to in subsection (a), for each fis- cal year of each of those 2 entities, shall be payable from annual accounting support fees, in accordance with subsections (d) and (e). Ac- counting support fees and other receipts of the Board and of such standard-setting body shall not be considered public monies of the United States. (2) Funds generated from the collection of monetary penalties Subject to the availability in advance in an appropriations Act, and notwithstanding sub- section (j), all funds collected by the Board as a result of the assessment of monetary pen- alties shall be used to fund a merit scholarship program for undergraduate and graduate stu- dents enrolled in accredited accounting degree programs, which program is to be adminis- tered by the Board or by an entity or agent identified by the Board. (d) Annual accounting support fee for the Board (1) Establishment of fee The Board shall establish, with the approval of the Commission, a reasonable annual ac- counting support fee (or a formula for the computation thereof), as may be necessary or appropriate to establish and maintain the Board. Such fee may also cover costs incurred in the Board’s first fiscal year (which may be a short fiscal year), or may be levied sepa- rately with respect to such short fiscal year. (2) Assessments The rules of the Board under paragraph (1) shall provide for the equitable allocation, as- sessment, and collection by the Board (or an agent appointed by the Board) of the fee estab- lished under paragraph (1), among issuers, in accordance with subsection (g), and among brokers and dealers, in accordance with sub- section (h), and allowing for differentiation among classes of issuers, brokers and dealers, as appropriate. (3) Brokers and dealers The Board shall begin the allocation, assess- ment, and collection of fees under paragraph (2) with respect to brokers and dealers with the payment of support fees to fund the first full fiscal year beginning after July 21, 2010. (e) Annual accounting support fee for standard setting body The annual accounting support fee for the standard setting body referred to in subsection (a)— (1) shall be allocated in accordance with sub- section (g), and assessed and collected against each issuer, on behalf of the standard setting body, by 1 or more appropriate designated col- lection agents, as may be necessary or appro- priate to pay for the budget and provide for the expenses of that standard setting body, and to provide for an independent, stable source of funding for such body, subject to re- view by the Commission; and (2) may differentiate among different classes of issuers. (f) Limitation on fee The amount of fees collected under this sec- tion for a fiscal year on behalf of the Board or the standards setting body, as the case may be, shall not exceed the recoverable budget expenses of the Board or body, respectively (which may include operating, capital, and accrued items), referred to in subsection (c)(1). (g) Allocation of accounting support fees among issuers Any amount due from issuers (or a particular class of issuers) under this section to fund the budget of the Board or the standard setting body referred to in subsection (a) shall be allocated among and payable by each issuer (or each issuer in a particular class, as applicable) in an amount equal to the total of such amount, mul- tiplied by a fraction— (1) the numerator of which is the average monthly equity market capitalization of the issuer for the 12-month period immediately preceding the beginning of the fiscal year to which such budget relates; and (2) the denominator of which is the average monthly equity market capitalization of all such issuers for such 12-month period. (h) Allocation of accounting support fees among brokers and dealers (1) Obligation to pay Each broker or dealer shall pay to the Board the annual accounting support fee allocated to such broker or dealer under this section. (2) Allocation Any amount due from a broker or dealer (or from a particular class of brokers and dealers) under this section shall be allocated among brokers and dealers and payable by the broker or dealer (or the brokers and dealers in the particular class, as applicable). (3) Proportionality The amount due from a broker or dealer shall be in proportion to the net capital of the broker or dealer (before or after any adjust- ments), compared to the total net capital of all brokers and dealers (before or after any ad- justments), in accordance with rules issued by the Board. (i) Omitted (j) Rule of construction Nothing in this section shall be construed to render either the Board, the standard setting body referred to in subsection (a), or both, sub- ject to procedures in Congress to authorize or appropriate public funds, or to prevent such or- ganization from utilizing additional sources of revenue for its activities, such as earnings from publication sales, provided that each additional source of revenue shall not jeopardize, in the judgment of the Commission, the actual and perceived independence of such organization. (k) Start-up expenses of the Board From the unexpended balances of the appro- priations to the Commission for fiscal year 2003, Page 2336 TITLE 15—COMMERCE AND TRADE § 7220 the Secretary of the Treasury is authorized to advance to the Board not to exceed the amount necessary to cover the expenses of the Board during its first fiscal year (which may be a short fiscal year). (Pub. L. 107–204, title I, § 109, July 30, 2002, 116 Stat. 769; Pub. L. 111–203, title IX, § 982(h), July 21, 2010, 124 Stat. 1930.) Editorial Notes CODIFICATION Section is comprised of section 109 of Pub. L. 107–204. Subsec. (i) of section 109 of Pub. L. 107–204 amended sec- tion 78m of this title. AMENDMENTS 2010—Subsec. (c)(2). Pub. L. 111–203, § 982(h)(1), sub- stituted ‘‘subsection (j)’’ for ‘‘subsection (i)’’. Subsec. (d)(2). Pub. L. 111–203, § 982(h)(2)(A), sub- stituted ‘‘and among brokers and dealers, in accordance with subsection (h), and allowing for differentiation among classes of issuers, brokers and dealers, as appro- priate’’ for ‘‘allowing for differentiation among classes of issuers, as appropriate’’. Subsec. (d)(3). Pub. L. 111–203, § 982(h)(2)(B), added par. (3). Subsecs. (h) to (k). Pub. L. 111–203, § 982(h)(3), (4), added subsec. (h) and redesignated former subsecs. (h) to (j) as (i) to (k), respectively. 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. OBLIGATION OF FUNDS FOR ACCOUNTING SCHOLARSHIP PROGRAM Pub. L. 116–93, div. C, title VI, § 620(b), Dec. 20, 2019, 133 Stat. 2481, provided that: ‘‘Beginning in fiscal year 2021 and for each fiscal year thereafter, the Board [Pub- lic Company Accounting Oversight Board] shall have authority to obligate funds for the scholarship program established by section 109(c)(2) of the Sarbanes-Oxley Act of 2002 (Public Law 107–204) [15 U.S.C. 7219(c)(2)] in such fiscal year in an aggregate amount not exceeding the amounts of funds collected by the Board between October 1 and September 30 of such fiscal year, includ- ing accrued interest, as a result of the assessment of monetary penalties. Funds made available for obliga- tion in any fiscal year shall be in addition to amounts made available in prior fiscal years and shall remain available until expended.’’ MONETARY PENALTIES TO FUND SCHOLARSHIPS FOR ACCOUNTING STUDENTS Pub. L. 116–6, div. D, title VI, § 620, Feb. 15, 2019, 133 Stat. 184, provided in part that: ‘‘Beginning in fiscal year 2020 and for each fiscal year thereafter, monetary penalties collected pursuant to 15 U.S.C. 7215 shall be deposited in the Public Company Accounting Oversight Board account as discretionary offsetting receipts.’’ § 7220. Definitions For the purposes of this subchapter, the fol- lowing definitions shall apply: (1) Audit The term ‘‘audit’’ means an examination of the financial statements, reports, documents, procedures, controls, or notices of any issuer, broker, or dealer by an independent public ac- counting firm in accordance with the rules of the Board or the Commission, for the purpose of expressing an opinion on the financial statements or providing an audit report. (2) Audit report The term ‘‘audit report’’ means a document, report, notice, or other record— (A) prepared following an audit performed for purposes of compliance by an issuer, broker, or dealer with the requirements of the securities laws; and (B) in which a public accounting firm ei- ther— (i) sets forth the opinion of that firm re- garding a financial statement, report, no- tice, or other document, procedures, or controls; or (ii) asserts that no such opinion can be expressed. (3) Broker The term ‘‘broker’’ means a broker (as such term is defined in section 78c(a)(4) of this title) that is required to file a balance sheet, income statement, or other financial statement under section 78q(e)(1)(A) of this title, where such balance sheet, income statement, or financial statement is required to be certified by a reg- istered public accounting firm. (4) Dealer The term ‘‘dealer’’ means a dealer (as such term is defined in section 78c(a)(5) of this title) that is required to file a balance sheet, income statement, or other financial statement under section 78q(e)(1)(A) of this title, where such balance sheet, income statement, or financial statement is required to be certified by a reg- istered public accounting firm. (5) Professional standards The term ‘‘professional standards’’ means— (A) accounting principles that are— (i) established by the standard setting body described in section 77s(b) of this title, as amended by this Act, or prescribed by the Commission under section 77s(a) of this title or section 78m(b) of this title; and (ii) relevant to audit reports for par- ticular issuers, brokers, or dealers, or dealt with in the quality control system of a particular registered public accounting firm; and (B) auditing standards, standards for attes- tation engagements, quality control policies and procedures, ethical and competency standards, and independence standards (in- cluding rules implementing title II) that the Board or the Commission determines— (i) relate to the preparation or issuance of audit reports for issuers, brokers, or dealers; and (ii) are established or adopted by the Board under section 7213(a) of this title, or are promulgated as rules of the Commis- sion. (6) Self-regulatory organization The term ‘‘self-regulatory organization’’ has the same meaning as in section 78c(a) of this title.