Summary of Amendments Submitted to the Rules Committee on
H.R. 3763 - Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002
(in alphabetical order)
Tuesday, April 23, 2002 (4:30 p.m.)
Capuano #1
Requires the SEC to analyze whether officers and directors of public companies should be required to disgorge profits gained or losses avoided if the company files a restated financial report. Removes the limit on requiring disgorgement only for transactions during the six months prior to the restatement.
Capuano #2
Clarifies that two members of the public regulatory organization (PRO) must be individuals licensed to practice public accounting, two members may be individuals licensed to practice public accounting if they have not practiced within two years of being appointed, and one member must not be licensed to practice public accounting. Specifies that all members of the PRO board must meet a standard of financial literacy as determined by the SEC.
Conyers #10
Clarifies current criminal laws relating to the destruction or fabrication of evidence by corporate auditors, creates a new 10-year felony for defrauding shareholders of publicly-traded companies, provides whistleblower protection to employees of publicly-traded companies and furnishes former employees with enhanced priority in bankruptcy to protect their lost pensions.
Kirk/McCarthy(NY) #3
Sets the President’s Memorandum of Understanding restructuring the Federal Accounting Standards Advisory Board (FASAB) and establishes the FASAB as an independent entity.
Kucinich #4
Substitute. Creates the Federal Bureau of Audits (FBA) to monitor corporate America’s books by auditing all publicly-traded companies. This new agency will be a part of the Securities and Exchange Commission (SEC), but maintain appropriate independence. The SEC will set the basic rules of auditing by incorporating the generally accepted auditing standards rules and making further refinements that are “necessary and appropriate in the public interest and for the protection of investors.” The FBA’s integrity will be ensured by several conflict of interest provisions to ensure that American taxpayers, investors, and employees get an accurate assessment of a corporation.
LaFalce #12
Substitute. Replaces the regulatory structure in the bill with one that requires establishment of a public regulator with specified duties and authority, modifies definitions of non-audit services to make the two bans on non-audit services included in the bill effective, provides for approval of non-audit services by the audit committee, replaces the executive responsibility provisions in the bill to require executive certification of financial statements, to improve the ability of the SEC to bar officers and directors from future service in public companies. Enables the SEC to obtain disgorgement of stock bonuses from executives who have falsified financial statements. Places limits on analyst conflicts of interest and improves corporate governance by giving audit committees oversight of auditors. Establishes an independent nominating committee for independent directors.
LaFalce #13
Requires a study of the proposed rules initiated by self-regulatory organizations on analyst conflicts of interest. Prohibits analysts from owning stocks in the companies they cover. Provides that analyst compensation be based on investment banking revenue. Prohibits investment banking departments from having any input into the hiring, termination, promotion or compensation of a securities analyst. Requires securities analyst compensation to be based on the quality of a securities analyst’s research.
LaFalce #14
Strikes Sections 11 & 12 of the bill and replaces them with three new sections: Empowers the SEC in certain enforcement actions to seek disgorgement of officer compensation for making false or misleading statements. Allows the SEC in an enforcement proceeding to bar officers and directors from serving as an officer or director of a public company if such persons committed serious misconduct. Requires the CEO and CFO to certify to the accuracy of the financial statements.
LaFalce #15
Adds a new section to the bill to require that an issuer obtain approval, by a majority of the stockholders, for any plan that an officer and director acquire equity securities of the company and to require that certain compensation decisions be made by a committee of independent directors.
LaFalce #16
Replaces the public regulatory organization (PRO) in the bill by requiring establishment of a PRO that would be controlled by a seven member board representing the public. The PRO would have auditing and quality standard setting authority, could conduct inspections of auditing firms and would have significant investigatory and disciplinary powers. Modifies the definitions of the two non-audit services prohibited by the bill to make these bans effective. Provides for approval of non-audit services by the audit committee of the board of directors and gives the audit committee broad authority over the relationship with the auditors.
Maloney (NY) #9
Repeals the exemption from full Commodity Futures Trading Commission oversight for electronic platforms trading energy and metals contracts, which was granted under the Commodity Futures Modernization Act.
Markey #8
Strengthens the ability of defrauded investors to hold auditors accountable for securities fraud by restoring joint and several liability for auditors, reinstating aiding and abetting liability, and requiring formal consideration by accounting firms of divestiture of interests in consulting and other non-audit services.
Oxley #5
Adds the text of H.R. 3764, the Securities and Exchange Commission Reauthorization Act of 2002, which would authorize twice the current funding level for the Division of Corporate Finance, the Office of the Chief Accountant, and the Division of Enforcement and authorize full funding to bring the salaries of SEC personnel into parity with those of other Federal financial regulators, as authorized by section 8 of the Investor and Capital Markets Fee Relief Act.
Oxley #6
Manager’s Amendment. Makes various technical and conforming changes, strikes provisions requiring companies listed on the stock exchanges to a code of ethics for senior corporate officers due to workability issues, and retains provisions regarding disclosure of changes in issuer codes of conduct.
Payne #11
Requires that within 5 business days after a plan administrator or an accountant identifies evidence of irregularity within a plan, that he or she would have to notify the Secretary of Labor.
Sherman #7
Directs the Securities and Exchange Commission to review the annual financial disclosure statements of the largest 500 reporting issuers (and as many other as the Commission determines to be appropriate), query the issuers regarding any ambiguous or unclear statements in the documents, and require the issuers to respond to the Commissions queries.
Sherman #17
Requires auditors of publicly-traded companies to meet a minimum net capital requirement of not less than one-half of the annual audit revenue received by the accountant from issuers registered with the SEC.
Sherman #18
Directs the SEC to revise its regulations with respect to the certification of financial statements by independent public or certified accountants to prohibit the vesting of authority to render an opinion on financial statements to any audit engagement team or any officer of the audit engagement team.
