15 U.S.C. § 7211 — Establishment; administrative provisions

Page 2320 TITLE 15—COMMERCE AND TRADE § 7202 Title II, referred to in par. (10)(B), means title II of Pub. L. 107–204, July 30, 2002, 116 Stat. 771, which en- acted subchapter II of this chapter and amended sec- tions 78c, 78j–1, 78l and 78q of this title. For complete classification of title II to the Code, see Tables. AMENDMENTS 2010—Pub. L. 111–203, § 982(a)(2), substituted ‘‘Except as otherwise specifically provided in this Act, in this’’ for ‘‘In this’’ in introductory provisions. Par. (9)(C). Pub. L. 111–203, § 929F(g)(1), added subpar. (C). Par. (17). Pub. L. 111–203, § 981(a), added par. (17). 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. SHORT TITLE OF 2020 AMENDMENT Pub. L. 116–222, § 1, Dec. 18, 2020, 134 Stat. 1063, pro- vided that: ‘‘This Act [enacting section 7214a of this title and amending section 7214 of this title] may be cited as the ‘Holding Foreign Companies Accountable Act’.’’ SHORT TITLE Pub. L. 107–204, § 1(a), July 30, 2002, 116 Stat. 745, pro- vided that: ‘‘This Act [see Tables for classification] may be cited as the ‘Sarbanes-Oxley Act of 2002’.’’ GAO STUDY AND REPORT REGARDING CONSOLIDATION OF PUBLIC ACCOUNTING FIRMS Pub. L. 107–204, title VII, § 701, July 30, 2002, 116 Stat. 797, directed the Comptroller General, in consultation with the Commission, regulatory agencies in other countries of the Group of Seven Industrialized Nations, the Justice Department, and others, to study the fac- tors resulting in the consolidation of public accounting firms and their impact, and to report the study findings to Congress not later than 1 year after July 30, 2002. § 7202. Commission rules and enforcement (a) Regulatory action The Commission shall promulgate such rules and regulations, as may be necessary or appro- priate in the public interest or for the protec- tion of investors, and in furtherance of this Act. (b) Enforcement (1) In general A violation by any person of this Act, any rule or regulation of the Commission issued under this Act, or any rule of the Board shall be treated for all purposes in the same manner as a violation of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or the rules and regulations issued thereunder, consistent with the provisions of this Act, and any such person shall be subject to the same penalties, and to the same extent, as for a violation of that Act or such rules or regulations. (2) to (4) Omitted (c) Effect on Commission authority Nothing in this Act or the rules of the Board shall be construed to impair or limit— (1) the authority of the Commission to regu- late the accounting profession, accounting firms, or persons associated with such firms for purposes of enforcement of the securities laws; (2) the authority of the Commission to set standards for accounting or auditing practices or auditor independence, derived from other provisions of the securities laws or the rules or regulations thereunder, for purposes of the preparation and issuance of any audit report, or otherwise under applicable law; or (3) the ability of the Commission to take, on the initiative of the Commission, legal, ad- ministrative, or disciplinary action against any registered public accounting firm or any associated person thereof. (Pub. L. 107–204, § 3, July 30, 2002, 116 Stat. 749.) Editorial Notes REFERENCES IN TEXT This Act, referred to in text, 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 Securities Exchange Act of 1934, referred to in subsec. (b)(1), 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. CODIFICATION Section is comprised of section 3 of Pub. L. 107–204. Subsec. (b)(2)–(4) of section 3 of Pub. L. 107–204 amended sections 78l, 78u, and 78u–3 of this title. SUBCHAPTER I—PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD § 7211. Establishment; administrative provisions (a) Establishment of Board There is established the Public Company Ac- counting Oversight Board, to oversee the audit of companies that are subject to the securities laws, and related matters, in order to protect the interests of investors and further the public interest in the preparation of informative, accu- rate, and independent audit reports. The Board shall be a body corporate, operate as a nonprofit corporation, and have succession until dissolved by an Act of Congress. (b) Status The Board shall not be an agency or establish- ment of the United States Government, and, ex- cept as otherwise provided in this Act, shall be subject to, and have all the powers conferred upon a nonprofit corporation by, the District of Columbia Nonprofit Corporation Act. No mem- ber or person employed by, or agent for, the Board shall be deemed to be an officer or em- ployee of or agent for the Federal Government by reason of such service. (c) Duties of the Board The Board shall, subject to action by the Com- mission under section 7217 of this title, and once a determination is made by the Commission under subsection (d) of this section— (1) register public accounting firms that pre- pare audit reports for issuers, brokers, and dealers, in accordance with section 7212 of this title; (2) establish or adopt, or both, by rule, audit- ing, quality control, ethics, independence, and other standards relating to the preparation of Page 2321 TITLE 15—COMMERCE AND TRADE § 7211 audit reports for issuers, brokers, and dealers, in accordance with section 7213 of this title; (3) conduct inspections of registered public accounting firms, in accordance with section 7214 of this title and the rules of the Board; (4) conduct investigations and disciplinary proceedings concerning, and impose appro- priate sanctions where justified upon, reg- istered public accounting firms and associated persons of such firms, in accordance with sec- tion 7215 of this title; (5) perform such other duties or functions as the Board (or the Commission, by rule or order) determines are necessary or appropriate to promote high professional standards among, and improve the quality of audit serv- ices offered by, registered public accounting firms and associated persons thereof, or other- wise to carry out this Act, in order to protect investors, or to further the public interest; (6) enforce compliance with this Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obliga- tions and liabilities of accountants with re- spect thereto, by registered public accounting firms and associated persons thereof; and (7) set the budget and manage the operations of the Board and the staff of the Board. (d) Commission determination The members of the Board shall take such ac- tion (including hiring of staff, proposal of rules, and adoption of initial and transitional auditing and other professional standards) as may be nec- essary or appropriate to enable the Commission to determine, not later than 270 days after July 30, 2002, that the Board is so organized and has the capacity to carry out the requirements of this subchapter, and to enforce compliance with this subchapter by registered public accounting firms and associated persons thereof. The Com- mission shall be responsible, prior to the ap- pointment of the Board, for the planning for the establishment and administrative transition to the Board’s operation. (e) Board membership (1) Composition The Board shall have 5 members, appointed from among prominent individuals of integ- rity and reputation who have a demonstrated commitment to the interests of investors and the public, and an understanding of the re- sponsibilities for and nature of the financial disclosures required of issuers, brokers, and dealers under the securities laws and the obli- gations of accountants with respect to the preparation and issuance of audit reports with respect to such disclosures. (2) Limitation Two members, and only 2 members, of the Board shall be or have been certified public ac- countants pursuant to the laws of 1 or more States, provided that, if 1 of those 2 members is the chairperson, he or she may not have been a practicing certified public accountant for at least 5 years prior to his or her appoint- ment to the Board. (3) Full-time independent service Each member of the Board shall serve on a full-time basis, and may not, concurrent with service on the Board, be employed by any other person or engage in any other profes- sional or business activity. No member of the Board may share in any of the profits of, or re- ceive payments from, a public accounting firm (or any other person, as determined by rule of the Commission), other than fixed continuing payments, subject to such conditions as the Commission may impose, under standard ar- rangements for the retirement of members of public accounting firms. (4) Appointment of Board members (A) Initial Board Not later than 90 days after July 30, 2002, the Commission, after consultation with the Chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury, shall appoint the chair- person and other initial members of the Board, and shall designate a term of service for each. (B) Vacancies A vacancy on the Board shall not affect the powers of the Board, but shall be filled in the same manner as provided for appoint- ments under this section. (5) Term of service (A) In general The term of service of each Board member shall be 5 years, and until a successor is ap- pointed, except that— (i) the terms of office of the initial Board members (other than the chairperson) shall expire in annual increments, 1 on each of the first 4 anniversaries of the ini- tial date of appointment; and (ii) any Board member appointed to fill a vacancy occurring before the expiration of the term for which the predecessor was ap- pointed shall be appointed only for the re- mainder of that term. (B) Term limitation No person may serve as a member of the Board, or as chairperson of the Board, for more than 2 terms, whether or not such terms of service are consecutive. (6) Removal from office A member of the Board may be removed by the Commission from office, in accordance with section 7217(d)(3) of this title, for good cause shown before the expiration of the term of that member. (f) Powers of the Board In addition to any authority granted to the Board otherwise in this Act, the Board shall have the power, subject to section 7217 of this title— (1) to sue and be sued, complain and defend, in its corporate name and through its own counsel, with the approval of the Commission, in any Federal, State, or other court; (2) to conduct its operations and maintain offices, and to exercise all other rights and powers authorized by this Act, in any State, without regard to any qualification, licensing, or other provision of law in effect in such State (or a political subdivision thereof); Page 2322 TITLE 15—COMMERCE AND TRADE § 7212 (3) to lease, purchase, accept gifts or dona- tions of or otherwise acquire, improve, use, sell, exchange, or convey, all of or an interest in any property, wherever situated; (4) to appoint such employees, accountants, attorneys, and other agents as may be nec- essary or appropriate, and to determine their qualifications, define their duties, and fix their salaries or other compensation (at a level that is comparable to private sector self- regulatory, accounting, technical, super- visory, or other staff or management posi- tions); (5) to allocate, assess, and collect accounting support fees established pursuant to section 7219 of this title, for the Board, and other fees and charges imposed under this subchapter; and (6) to enter into contracts, execute instru- ments, incur liabilities, and do any and all other acts and things necessary, appropriate, or incidental to the conduct of its operations and the exercise of its obligations, rights, and powers imposed or granted by this subchapter. (g) Rules of the Board The rules of the Board shall, subject to the ap- proval of the Commission— (1) provide for the operation and administra- tion of the Board, the exercise of its authority, and the performance of its responsibilities under this Act; (2) permit, as the Board determines nec- essary or appropriate, delegation by the Board of any of its functions to an individual mem- ber or employee of the Board, or to a division of the Board, including functions with respect to hearing, determining, ordering, certifying, reporting, or otherwise acting as to any mat- ter, except that— (A) the Board shall retain a discretionary right to review any action pursuant to any such delegated function, upon its own mo- tion; (B) a person shall be entitled to a review by the Board with respect to any matter so delegated, and the decision of the Board upon such review shall be deemed to be the action of the Board for all purposes (includ- ing appeal or review thereof); and (C) if the right to exercise a review de- scribed in subparagraph (A) is declined, or if no such review is sought within the time stated in the rules of the Board, then the ac- tion taken by the holder of such delegation shall for all purposes, including appeal or re- view thereof, be deemed to be the action of the Board; (3) establish ethics rules and standards of conduct for Board members and staff, includ- ing a bar on practice before the Board (and the Commission, with respect to Board-related matters) of 1 year for former members of the Board, and appropriate periods (not to exceed 1 year) for former staff of the Board; and (4) provide as otherwise required by this Act. (h) Annual report to the Commission The Board shall submit an annual report (in- cluding its audited financial statements) to the Commission, and the Commission shall transmit a copy of that report to the Committee on Bank- ing, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives, not later than 30 days after the date of receipt of that report by the Commission. (Pub. L. 107–204, title I, § 101, July 30, 2002, 116 Stat. 750; Pub. L. 111–203, title IX, § 982(b), July 21, 2010, 124 Stat. 1928.) Editorial Notes REFERENCES IN TEXT This Act, referred to in subsecs. (b), (c)(5), (6), (f), and (g)(1), (4), 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 District of Columbia Nonprofit Corporation Act, referred to in subsec. (b), is Pub. L. 87–569, Aug. 6, 1962, 76 Stat. 265, which is not classified to the Code. 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. (a). Pub. L. 111–203, § 982(b)(2), sub- stituted ‘‘companies that’’ for ‘‘public companies that’’ and struck out ‘‘for companies the securities of which are sold to, and held by and for, public investors’’ after ‘‘independent audit reports’’. Subsecs. (c)(1), (2), (e)(1). Pub. L. 111–203, § 982(b)(1), substituted ‘‘issuers, brokers, and dealers’’ for ‘‘issuers’’. 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. § 7212. Registration with the Board (a) Mandatory registration It shall be unlawful for any person that is not a registered public accounting firm to prepare or issue, or to participate in the preparation or issuance of, any audit report with respect to any issuer, broker, or dealer. (b) Applications for registration (1) Form of application A public accounting firm shall use such form as the Board may prescribe, by rule, to apply for registration under this section. (2) Contents of applications Each public accounting firm shall submit, as part of its application for registration, in such detail as the Board shall specify— (A) the names of all issuers, brokers, and dealers for which the firm prepared or issued audit reports during the immediately pre- ceding calendar year, and for which the firm expects to prepare or issue audit reports dur- ing the current calendar year; (B) the annual fees received by the firm from each such issuer, broker, or dealer for audit services, other accounting services, and non-audit services, respectively;