15 U.S.C. § 7246 — Fair funds for investors

Page 2340 TITLE 15—COMMERCE AND TRADE § 7245 1 So in original. The word ‘‘of’’ probably should not appear. Editorial Notes REFERENCES IN TEXT For amendments made by this subsection and this section, referred to in subsecs. (b) and (c), see Codifica- tion note below. CODIFICATION Section is comprised of section 306 of Pub. L. 107–204. Subsec. (b)(1) of section 306 of Pub. L. 107–204 amended section 1021 of Title 29, Labor, and another par. (3) of subsec. (b) amended section 1132 of Title 29. § 7245. Rules of professional responsibility for at- torneys Not later than 180 days after July 30, 2002, the Commission shall issue rules, in the public in- terest and for the protection of investors, set- ting forth minimum standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the rep- resentation of issuers, including a rule— (1) requiring an attorney to report evidence of a material violation of securities law or breach of fiduciary duty or similar violation by the company or any agent thereof, to the chief legal counsel or the chief executive offi- cer of the company (or the equivalent thereof); and (2) if the counsel or officer does not appro- priately respond to the evidence (adopting, as necessary, appropriate remedial measures or sanctions with respect to the violation), re- quiring the attorney to report the evidence to the audit committee of the board of directors of the issuer or to another committee of the board of directors comprised solely of direc- tors not employed directly or indirectly by the issuer, or to the board of directors. (Pub. L. 107–204, title III, § 307, July 30, 2002, 116 Stat. 784.) § 7246. Fair funds for investors (a) Civil penalties to be used for the relief of vic- tims If, in any judicial or administrative action brought by the Commission under the securities laws, the Commission obtains a civil penalty against any person for a violation of such laws, or such person agrees, in settlement of any such action, to such civil penalty, the amount of such civil penalty shall, on the motion or at the di- rection of the Commission, be added to and be- come part of a disgorgement fund or other fund established for the benefit of the victims of such violation. (b) Acceptance of additional donations The Commission is authorized to accept, hold, administer, and utilize gifts, bequests and de- vises of property, both real and personal, to the United States for a disgorgement fund or other fund described in subsection (a). Such gifts, be- quests, and devises of money and proceeds from sales of other property received as gifts, be- quests, or devises shall be deposited in such fund and shall be available for allocation in accord- ance with subsection (a). (c) Study required (1) Subject of study The Commission shall review and analyze— (A) enforcement actions by the Commis- sion over the five years preceding July 30, 2002, that have included proceedings to ob- tain civil penalties or disgorgements to iden- tify areas where such proceedings may be utilized to efficiently, effectively, and fairly provide restitution for injured investors; and (B) other methods to more efficiently, ef- fectively, and fairly provide restitution to injured investors, including methods to im- prove the collection rates for civil penalties and disgorgements. (2) Report required The Commission shall report its findings to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate within 180 days after of 1 July 30, 2002, and shall use such findings to revise its rules and regulations as necessary. The report shall include a discussion of regulatory or legisla- tive actions that are recommended or that may be necessary to address concerns identi- fied in the study. (Pub. L. 107–204, title III, § 308, July 30, 2002, 116 Stat. 784; Pub. L. 111–203, title IX, § 929B, July 21, 2010, 124 Stat. 1852.) Editorial Notes CODIFICATION Section is comprised of section 308 of Pub. L. 107–204. Subsec. (d) of section 308 of Pub. L. 107–204 amended sections 77t, 78u, 78u–1, 80a–41, and 80b–9 of this title. AMENDMENTS 2010—Subsec. (a). Pub. L. 111–203, § 929B(1), added sub- sec. (a) and struck out former subsec. (a). Prior to amendment, text read as follows: ‘‘If in any judicial or administrative action brought by the Commission under the securities laws (as such term is defined in section 78c(a)(47) of this title) the Commission obtains an order requiring disgorgement against any person for a violation of such laws or the rules or regulations thereunder, or such person agrees in settlement of any such action to such disgorgement, and the Commission also obtains pursuant to such laws a civil penalty against such person, the amount of such civil penalty shall, on the motion or at the direction of the Commis- sion, be added to and become part of the disgorgement fund for the benefit of the victims of such violation.’’ Subsec. (b). Pub. L. 111–203, § 929B(2), substituted ‘‘for a disgorgement fund or other fund described in sub- section (a)’’ for ‘‘for a disgorgement fund described in subsection (a)’’ and ‘‘in such fund’’ for ‘‘in the disgorgement fund’’. Subsec. (e). Pub. L. 111–203, § 929B(3), struck out sub- sec. (e). Text read as follows: ‘‘As used in this section, the term ‘disgorgement fund’ means a fund established in any administrative or judicial proceeding described in subsection (a) of this section.’’ 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. Page 2341 TITLE 15—COMMERCE AND TRADE § 7262 SUBCHAPTER IV—ENHANCED FINANCIAL DISCLOSURES § 7261. Disclosures in periodic reports (a) Omitted (b) Commission rules on pro forma figures Not later than 180 days after July 30, 2002, the Commission shall issue final rules providing that pro forma financial information included in any periodic or other report filed with the Com- mission pursuant to the securities laws, or in any public disclosure or press or other release, shall be presented in a manner that— (1) does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the pro forma financial information, in light of the cir- cumstances under which it is presented, not misleading; and (2) reconciles it with the financial condition and results of operations of the issuer under generally accepted accounting principles. (c) Study and report on special purpose entities (1) Study required The Commission shall, not later than 1 year after the effective date of adoption of off-bal- ance sheet disclosure rules required by section 78m(j) of this title, complete a study of filings by issuers and their disclosures to determine— (A) the extent of off-balance sheet trans- actions, including assets, liabilities, leases, losses, and the use of special purpose enti- ties; and (B) whether generally accepted accounting rules result in financial statements of issuers reflecting the economics of such off- balance sheet transactions to investors in a transparent fashion. (2) Report and recommendations Not later than 6 months after the date of completion of the study required by paragraph (1), the Commission shall submit a report to the President, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives, setting forth— (A) the amount or an estimate of the amount of off-balance sheet transactions, in- cluding assets, liabilities, leases, and losses of, and the use of special purpose entities by, issuers filing periodic reports pursuant to section 78m or 78o of this title; (B) the extent to which special purpose en- tities are used to facilitate off-balance sheet transactions; (C) whether generally accepted accounting principles or the rules of the Commission re- sult in financial statements of issuers re- flecting the economics of such transactions to investors in a transparent fashion; (D) whether generally accepted accounting principles specifically result in the consoli- dation of special purpose entities sponsored by an issuer in cases in which the issuer has the majority of the risks and rewards of the special purpose entity; and (E) any recommendations of the Commis- sion for improving the transparency and quality of reporting off-balance sheet trans- actions in the financial statements and dis- closures required to be filed by an issuer with the Commission. (Pub. L. 107–204, title IV, § 401, July 30, 2002, 116 Stat. 785.) Editorial Notes CODIFICATION Section is comprised of section 401 of Pub. L. 107–204. Subsec. (a) of section 401 of Pub. L. 107–204 amended section 78m of this title. § 7262. Management assessment of internal con- trols (a) Rules required The Commission shall prescribe rules requir- ing each annual report required by section 78m(a) or 78o(d) of this title to contain an inter- nal control report, which shall— (1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and (2) contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial re- porting. (b) Internal control evaluation and reporting With respect to the internal control assess- ment required by subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer, other than an issuer that is an emerging growth company (as defined in section 78c of this title), shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this subsection shall be made in accord- ance with standards for attestation engage- ments issued or adopted by the Board. Any such attestation shall not be the subject of a separate engagement. (c) Exemption for smaller issuers Subsection (b) shall not apply with respect to any audit report prepared for an issuer that is neither a ‘‘large accelerated filer’’ nor an ‘‘ac- celerated filer’’ as those terms are defined in Rule 12b–2 of the Commission (17 C.F.R. 240.12b–2). (Pub. L. 107–204, title IV, § 404, July 30, 2002, 116 Stat. 789; Pub. L. 111–203, title IX, § 989G(a), July 21, 2010, 124 Stat. 1948; Pub. L. 112–106, title I, § 103, Apr. 5, 2012, 126 Stat. 310.) Editorial Notes AMENDMENTS 2012—Subsec. (b). Pub. L. 112–106 inserted ‘‘, other than an issuer that is an emerging growth company (as defined in section 78c of this title),’’ before ‘‘shall at- test to’’. 2010—Subsec. (c). Pub. L. 111–203 added subsec. (c). 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