11210 Federal Register / Vol. 75, No. 46 / Wednesday, March 10, 2010 / Notices 

20For purposes of the shell bank prohibitions, a 

covered institution generally includes: U.S. banks, 

savings associations, credit unions, private bankers, 

and trust companies; branches and agencies of 

foreign banks; Edge Act corporations; and securities 

broker-dealers. 31 CFR 103.175(f)(2). 

21For purposes of the foreign shell bank 

prohibitions, a ‘‘correspondent account’’ is defined 

as an account established for a foreign bank to 

receive deposits from, or to make payments or other 

disbursements on behalf of, the foreign bank, or to 

handle other financial transactions related to such 

foreign bank. 31 CFR 103.175(d)(1)(ii). 

22See, 31 CFR 103.177. 

23 31 CFR 103.177(a)(1)(ii). 

24For purposes of 31 CFR 103.177, ‘‘owner’’ is 

defined at 31 CFR 103.175(l). Similarly, under the 

enhanced due diligence provisions of the 

correspondent account rule, the covered financial 

institution may need to identify the owners of 

foreign banks whose shares are not publicly-traded. 

See, 31 CFR 103.176(b)(3). An ‘‘owner’’ is defined 

for this purpose to include any person who directly 

or indirectly owns, controls, or has the power to 

vote 10 percent or more of any class of securities. 

See, 31 CFR 103.176(b)(3)(ii). 

25See 31 CFR 103.177(a)(2). 

1See SEC Release No. 34–61032 (November 19, 

2009); 74 FR 61722 (November 25, 2009). 

2See PCAOB Rule 4003. 

3See section 104(b)(2) of the Act [15 U.S.C. 

7214(b)]. 

4See PCAOB Release No. 2009–003 (June 25, 

2009). 

5 Ibid. 

6 Ibid. 

Additionally, covered financial 

institutions 20 are prohibited from 

opening and maintaining correspondent 

accounts 21 for foreign shell banks.22

Covered financial institutions that offer 

foreign correspondent accounts must 

take reasonable steps to ensure the 

account is not being used to indirectly 

provide banking services to foreign shell 

banks.23 The covered financial 

institution must identify the owners 24

of foreign banks whose shares are not 

publicly traded and record the name 

and address of a person in the United 

States that is authorized to be an agent 

to accept service of legal process.25

With regard to foreign correspondent 

accounts, a covered financial 

institution’s failure to maintain records 

identifying the owners of non-publicly 

traded foreign banks could be viewed as 

a violation of the requirements of 31 

CFR 103.177. 

For questions about this guidance, 

please contact FinCEN’s Regulatory 

Helpline at (800) 949–2732 or your 

appropriate regulatory agency. 

[FR Doc. 2010–5075 Filed 3–9–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61649; File No. PCAOB– 

2009–01] 

Public Company Accounting Oversight 

Board; Order Approving Proposed 

Amendment to Board Rules Relating to 

Inspections 

March 4, 2010. 

I. Introduction 

On July 2, 2009, the Public Company 

Accounting Oversight Board (the 

‘‘Board’’ or the ‘‘PCAOB’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) a proposed rule 

amendment (PCAOB–2009–01) 

pursuant to Section 107(b) of the 

Sarbanes-Oxley Act of 2002 (the ‘‘Act’’) 

relating to the Board’s rules governing 

inspections of registered public 

accounting firms. Notice of the 

proposed rule amendment was 

published in the Federal Register on 

November 25, 2009.1 The Commission 

did not receive any comment letters 

relating to the proposed rule 

amendment. For the reasons discussed 

below, the Commission is granting 

approval of the proposed rule 

amendment. 

II. Description 

The PCAOB’s proposed rule 

amendment would add paragraph (g) to 

existing PCAOB Rule 4003, Frequency 

of Inspections, to give the Board the 

ability to postpone, for up to three years, 

the current 2009 deadline for the first 

inspection of 49 non-U.S. firms that are 

located in 24 jurisdictions in which the 

Board has not conducted an inspection 

prior to 2009. As discussed further 

below, under the proposed rule 

amendment, the Board would conduct 

these inspections in each of the years 

from 2009 through 2012 according to a 

sequencing based on the U.S. market 

capitalization of the aforementioned 49 

firms’ issuer audit clients. The proposed 

rule amendment does not affect 

inspection frequency requirements 

concerning any other first inspections or 

concerning any second, or later, 

inspections of a firm. Further, the 

proposed amendment itself does not 

limit the PCAOB’s authority to conduct 

inspections at any time and does not 

affect registered firms’ obligations under 

the Act. 

Pursuant to the requirements of 

Section 107(b) of the Act and Section 

19(b) of the Securities Exchange Act of 

1934 (the ‘‘Exchange Act’’), the 

Commission published the proposed 

rule amendment for public comment on 

November 25, 2009. 

III. Discussion of Comments 

The Commission did not receive any 

comment letters relating to the proposed 

rule amendment. 

IV. Discussion 

Section 104 of the Act requires the 

PCAOB to conduct a continuing 

program of inspections to assess the 

degree of compliance of each registered 

public accounting firm and associated 

persons of that firm with the Act, the 

rules of the PCAOB, the rules of the 

Commission, and professional 

standards, in connection with its 

performance of audits, issuance of audit 

reports, and related maters involving 

issuers. Under current PCAOB rules, the 

PCAOB must conduct an inspection 

annually of each firm that issued audit 

reports for more than 100 issuers in the 

previous calendar year; and must 

conduct an inspection once every three 

years of each firm that, during any of the 

three prior calendar years, issued an 

audit report for at least one but not more 

than 100 issuers, or that played a 

substantial role in the preparation or 

furnishing of an audit report for at least 

one issuer.2 The Act authorizes the 

PCAOB, by rule and with SEC approval, 

to adjust these frequency requirements 

if the Board finds that different 

inspection schedules are consistent with 

the purpose of the Act, the public 

interest, and the protection of 

investors.3

As described by the PCAOB, there 

were 49 non-U.S. registered firms that, 

by virtue of when they first issued audit 

reports after registering with the 

PCAOB, the Board was required to 

inspect for the first time by the end of 

2009, and that were located in 24 

jurisdictions where the Board had not 

conducted any inspections to date.4 The 

Board indicated that these inspections 

were not conducted because of issues 

that relate primarily to the coordination 

of inspections with local authorities and 

the resolution of potential conflicts of 

law.5

In summarizing its rationale for the 

necessity of the proposed rule 

amendment, the Board noted its belief 

that most of the aforementioned 24 

jurisdictions have or soon will have a 

local auditor oversight authority with 

which the Board would seek to work 

toward cooperative arrangements before 

conducting inspections, and noted its 

concerns about proceeding as if such 

cooperative arrangements and other 

necessary steps could be completed for 

all 24 jurisdictions in time to conduct 

the required inspections by the end of 

2009.6 To address these concerns, the 

Board adopted and submitted to the 

Commission for approval the proposed 

rule amendment, new paragraph (g) to 

Rule 4003, to allow it to defer these 

inspections for up to three years. 


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Federal Register / Vol. 75, No. 46 / Wednesday, March 10, 2010 / Notices 11211 

7See http://pcaobus.org/News/Releases/Pages/ 

02032010_Progress_IntlInspections.aspx. The 

PCAOB also noted that that it intends to update its 

progress report semiannually to reflect information 

current as of June 30 and December 31. 

8Cf., PCAOB Release 2009–003 (June 25, 2009) 

(expressing the view that ‘‘There is long-term value 

in accepting a limited delay in inspections to 

continue working toward cooperative arrangements 

where it appears reasonably possible to reach 

them.’’). 

9See, PCAOB Release 2009–003 (June 25, 2009) 

(stating that ‘‘[I]nspection is the Board’s primary 

tool of oversight.’’). 

10As part of its semiannual disclosures, the 

PCAOB also discloses a list of those registered firms 

where inspections have not been completed by the 

PCAOB, even though more than four years have 

passed since the end of the calendar year in which 

the firm first issued an auditor report while 

registered with the PCAOB. 

11Separately, in the Commission’s order 

approving the PCAOB’s budget and annual 

accounting support fee for calendar year 2010, the 

Commission directed the PCAOB to include in its 

quarterly reports to the Commission information 

about the timing of the PCAOB’s international 

inspection program and updates on the PCAOB’s 

efforts to establish cooperative arrangements with 

respective non-U.S. authorities for inspections 

required in those countries. See SEC Release No. 

34–61212 (December 22, 2009); 74 FR 68875 

(December 29, 2009). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The $0.50 Strike Program was initially approved 

on September 18, 2009. See Securities Exchange 

Act Release No. 60694 (September 18, 2009), 74 FR 

49048 (September 25, 2009) (SR–Phlx–2009–65) 

(order approving). 

In the Commission’s publication of 

the proposed rules for comment, the 

notice indicated the following: 

In determining the schedule for completion 

of the inspections subject to new paragraph 

(g), the Board will implement its proposal to 

sequence these 49 inspections such that 

certain minimum thresholds will be satisfied 

in each of the years from 2009 to 2012. The 

minimum thresholds relate to U.S. market 

capitalization of firms’ issuer audit clients. 

The Board will begin by ranking the 49 firms 

according to the total U.S. market 

capitalization of a firm’s foreign private 

issuer audit clients. Working from the top of 

the list (highest U.S. market capitalization 

total) down, the 49 firms will be distributed 

over 2009 to 2012 such that, at a minimum, 

the following criteria are satisfied: 

• by the end of 2009, the Board will 

inspect firms whose combined issuer audit 

clients’ U.S. market capitalization constitutes 

at least 35 percent of the aggregate U.S. 

market capitalization of the audit clients of 

all 49 firms; 

• by the end of 2010, the Board will 

inspect firms whose combined issuer audit 

clients’ U.S. market capitalization constitutes 

at least 90 percent of that aggregate; 

• by the end of 2011, the Board will 

inspect firms whose combined issuer audit 

clients’ U.S. market capitalization constitutes 

at least 99.9 percent of that aggregate; and 

• the Board will inspect the remaining 

firms in 2012. 

In addition to meeting those market 

capitalization thresholds, the Board also will 

satisfy certain criteria concerning the number 

of those 49 firms that will be inspected in 

each year. Specifically, the Board will 

conduct at least four of the 49 inspections in 

2009, at least 11 more in 2010, and at least 

14 more in 2011. (footnotes omitted) 

On February 3, 2010, the PCAOB 

released new and updated information 

about the status of its inspections of 

registered non-U.S. accounting firms, 

including reporting on the PCAOB’s 

progress in meeting the above target 

thresholds.7 Specifically, the PCAOB 

reported that, as of December 31, 2009, 

the PCAOB had inspected five firms that 

would meet the proposed Rule 4003(g) 

criteria for deferral. However, the 

PCAOB inspected only two of the four 

firms that the PCAOB had scheduled for 

inspection in 2009 based on their 

clients’ U.S. market capitalization. As a 

result, the PCAOB did not meet the 

target threshold for U.S. market 

capitalization for 2009. The PCAOB was 

unable to conduct the inspections of the 

remaining two firms it intended to 

inspect in 2009 because, on the basis of 

asserted restrictions under non-U.S. 

law, access to information necessary to 

conduct the inspections was denied. 

The PCAOB also reported that 

discussions are continuing with the 

relevant authorities in the affected 

jurisdictions in an effort to resolve their 

objections to PCAOB inspections. We 

agree that the PCAOB should continue 

to work toward cooperative 

arrangements with the appropriate local 

auditor oversight authorities where it is 

reasonably likely that appropriate 

cooperative arrangements can be 

obtained.8 We also recognize that 

formalization and finalization of such 

arrangements take time. However, as the 

Board has acknowledged, inspection is 

the cornerstone of the Board’s regulatory 

oversight of audit firms.9 Public 

companies and investors rely on the 

integrity of the auditing work performed 

by firms registered with the PCAOB, 

and the salutary effects of briefly 

delaying inspection of certain of these 

firms decrease as the period of delay 

increases or there no longer appears to 

be a reasonable possibility of reaching 

appropriate cooperative arrangements. 

Accordingly, we encourage the 

PCAOB to continue to work with 

deliberate speed with its foreign 

counterparts to finalize these 

cooperative arrangements. We continue 

to expect the PCAOB to satisfy its 

announced inspection schedule for 

2010–2012.10 We also direct the PCAOB 

to work closely with Commission staff 

in the PCAOB’s ongoing discussions 

with relevant authorities and efforts to 

meet its non-U.S. audit firm inspection 

schedule.11

V. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

amendment of the Board’s rules 

governing inspections of registered 

public accounting firms are consistent 

with the requirements of the Act and the 

securities laws and are necessary or 

appropriate in the public interest or for 

the protection of investors. 

It is therefore ordered, pursuant to 

section 107 of the Act and section 

19(b)(2) of the Exchange Act, that the 

proposed rule amendment (File No. 

PCAOB 2009–01) be and hereby is 

approved. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–5046 Filed 3–9–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61630; File No. SR–Phlx– 

2010–26] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NASDAQ 

OMX PHLX, Inc. To Permit the 

Concurrent Listing of $3.50 and $4 

Strikes for Classes Participating in the 

$0.50 Strike Program and the $1 Strike 

Program 

March 2, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

19, 2010, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing with the 

Commission a proposal to amend 

Commentary .05 to Rule 1012 (Series of 

Options Open for Trading) to permit the 

concurrent listing of $3.50 and $4 

strikes for classes that participate in 

both the $0.50 Strike Price Program 

(‘‘$0.50 Strike Program’’) 3 and the $1 


erowe on DSK5CLS3C1PROD with NOTICES