```

[Journal of the House of Representatives, 1995]
[Wednesday, March 8, 1995 (40), Para 40.21 Roll No. 214]
[Pages 349-351]
[From the U.S. Government Publishing Office, www.gpo.gov]

para.40.21                   [Roll No. 214]

                                AYES--167

     Ackerman
     Baldacci
     Barcia
     Barrett (WI)
     Becerra
     Beilenson
     Bentsen
     Berman
     Bevill
     Bishop
     Bonior
     Borski
     Boucher
     Brewster
     Browder
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Bryant (TX)
     Buyer
     Cardin
     Chapman
     Clay
     Clayton
     Clement
     Clyburn
     Coburn
     Coleman
     Collins (IL)
     Collins (MI)
     Conyers
     Costello
     Coyne
     Cramer
     de la Garza
     DeFazio
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Doyle
     Duncan
     Durbin
     Edwards
     Engel
     Eshoo
     Evans
     Fattah
     Fazio
     Fields (LA)
     Filner
     Flake
     Foglietta
     Ford
     Fox
     Frost
     Furse
     Gejdenson
     Gephardt
     Gonzalez
     Gordon
     Green
     Gutierrez
     Hall (OH)
     Hamilton
     Hastings (FL)
     Hefner
     Hilliard
     Hinchey
     Holden
     Hoyer
     Jackson-Lee
     Jacobs
     Johnson, E. B.
     Johnston
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kildee
     King
     Kleczka
     Klink
     LaFalce
     Lantos
     Levin
     Lewis (GA)
     Lincoln
     Lipinski
     Lofgren
     Luther
     Maloney
     Manton
     Markey
     Martinez
     Mascara
     Matsui
     McCarthy
     McDermott
     McHale
     McNulty
     Meehan
     Menendez
     Mfume
     Miller (CA)
     Mineta
     Moakley
     Mollohan
     Murtha
     Nadler
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pastor
     Payne (NJ)
     Pelosi
     Peterson (FL)
     Pomeroy
     Poshard
     Rahall
     Reed
     Reynolds
     Richardson
     Rivers
     Rose
     Roybal-Allard
     Rush
     Sabo
     Sanders
     Sawyer
     Schroeder
     Schumer
     Scott
     Serrano
     Skaggs
     Slaughter
     Spratt
     Stark
     Studds
     Stupak
     Taylor (MS)
     Tejeda
     Thompson
     Thornton
     Thurman
     Torres
     Torricelli
     Towns
     Traficant
     Velazquez
     Vento
     Visclosky
     Ward
     Waters
     Watt (NC)
     Waxman
     Wise
     Woolsey
     Wyden
     Wynn
     Yates

                                NOES--254

     Abercrombie
     Allard
     Andrews
     Armey
     Bachus
     Baesler
     Baker (CA)
     Baker (LA)
     Ballenger
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Bilirakis
     Bliley
     Blute
     Boehlert
     Boehner
     Bonilla
     Bono
     Brownback
     Bryant (TN)
     Bunn
     Bunning
     Burr
     Burton
     Callahan
     Calvert
     Camp
     Canady
     Castle
     Chabot
     Chambliss
     Chenoweth
     Christensen
     Chrysler
     Clinger
     Coble
     Collins (GA)
     Combest
     Condit
     Cooley
     Cox
     Crane
     Crapo
     Cremeans
     Cubin
     Cunningham
     Danner
     Davis
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Dooley
     Doolittle
     Dornan
     Dreier
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Everett
     Ewing
     Farr
     Fawell
     Fields (TX)
     Flanagan
     Foley
     Forbes
     Fowler
     Frank (MA)
     Franks (CT)
     Franks (NJ)
     Frelinghuysen
     Frisa
     Funderburk
     Gallegly
     Ganske
     Gekas
     Geren
     Gilchrest
     Gillmor
     Gilman
     Goodlatte
     Goodling
     Goss
     Graham
     Greenwood
     Gunderson
     Gutknecht
     Hall (TX)
     Hancock
     Hansen
     Harman
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Heineman
     Herger
     Hilleary
     Hobson
     Hoekstra
     Hoke
     Horn
     Hostettler
     Houghton
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Johnson (CT)
     Johnson (SD)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kennelly
     Kim
     Kingston
     Klug
     Knollenberg
     Kolbe
     LaHood
     Largent
     Latham
     LaTourette
     Laughlin
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Lightfoot
     Linder
     Livingston
     LoBiondo
     Longley
     Lucas
     Manzullo
     Martini
     McCollum
     McCrery
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Meyers
     Mica
     Miller (FL)
     Minge
     Mink
     Molinari
     Montgomery
     Moorhead
     Moran
     Morella
     Myers
     Myrick
     Nethercutt
     Neumann
     Ney
     Norwood
     Nussle
     Orton
     Oxley
     Packard
     Parker
     Paxon
     Payne (VA)
     Peterson (MN)
     Petri
     Pickett
     Pombo
     Porter
     Portman
     Pryce
     Quillen
     Quinn
     Radanovich
     Ramstad
     Regula
     Riggs
     Roberts
     Roemer
     Rogers
     Rohrabacher
     Ros-Lehtinen
     Roth
     Roukema
     Royce
     Salmon
     Sanford
     Saxton
     Scarborough
     Schaefer
     Schiff
     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Shuster
     Sisisky
     Skeen
     Skelton
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Solomon
     Souder
     Spence
     Stearns
     Stenholm
     Stockman
     Stump
     Talent
     Tanner
     Tate
     Tauzin
     Taylor (NC)
     Thomas
     Thornberry
     Tiahrt
     Torkildsen
     Tucker
     Upton
     Volkmer
     Vucanovich
     Waldholtz
     Walker
     Walsh
     Wamp
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     White
     Whitfield
     Wicker
     Williams
     Wilson
     Wolf
     Young (AK)
     Young (FL)
     Zeliff

                         ANSWERED ``PRESENT''--1

       
       Lowey
       

                             NOT VOTING--12

     Archer
     Bilbray
     Gibbons
     Jefferson
     McDade
     McKinney
     Meek
     Neal
     Rangel
     Seastrand
     Stokes
     Zimmer
  So the amendment was not agreed to.
  The SPEAKER pro tempore, Mr. McINNIS, assumed the Chair.
  When Mr. COMBEST, Chairman, pursuant to House Resolution 105, reported 
the bill back to the House with sundry amendments adopted by the 
Committee.
  The previous question having been ordered by said resolution.
  The following amendments, reported from the Committee of the Whole 
House on the state of the Union, were agreed to:

       Page 28, after line 2, insert the following new section 
     (and redesignate the succeeding sections and conform the 
     table of contents accordingly):

[[Page 350]]

     SEC. 6. AMENDMENT TO RACKETEER INFLUENCED AND CORRUPT 
                   ORGANIZATIONS ACT.

       Section 1964(c) of title 18, United States Code, is amended 
     by inserting ``, except that no person may bring an action 
     under this provision if the racketeering activity, as defined 
     in section 1961(1)(D), involves conduct actionable as fraud 
     in the purchase or sale of securities'' before the period.
       Page 9, line 5, strike ``verifies'' and insert 
     ``certifies''.
       Page 11, line 21, and page 13, line 20, strike ``any 
     settlement'' and insert ``any proposed or final settlement''.
       Page 12, line 9, insert ``per share'' after ``potential 
     damages''.
       Page 14, beginning on line 18, strike ``The order shall 
     bar'' and all that follows through line 23, and insert the 
     following:
       The order shall bar all future claims for contribution 
     arising out of the action--
       ``(A) by any person against the settling defendant; and
       ``(B) by the settling defendant against any person older 
     than a person whose liability has been extinguished by the 
     settling defendant's settlement.
       Page 16, line 20, insert ``section 10(b) of'' after 
     ``under''.
       Page 17, line 6, insert ``to state'' after ``or omits''.
       Page 17, line 25, strike ``or sellers'' and insert ``, 
     sellers, or security holders''.
       Page 18, line 2, strike ``consciously''.
       Page 19, line 25, insert ``knowledge and'' after 
     ``paragraph (1),''.
       Page 18, beginning on line 2, strike ``For example'' and 
     all that follows through line 5 and insert the following: 
     ``Deliberately refraining from taking steps to discover 
     whether one's statements are false or misleading constitutes 
     recklessness, but if the failure to investigate was not 
     deliberate, such conduct shall not be considered to be 
     reckless.''
       Page 26, beginning on line 1, strike section 37 through 
     page 28, line 2, and insert the following:

     ``SEC. 37. APPLICATION OF SAFE HARBOR FOR FORWARD-LOOKING 
                   STATEMENTS.

       ``(a) Safe Harbor In General.--In any private action 
     arising under this title based on a fraudulent statement (as 
     defined in section 10A), a person shall not be liable with 
     respect to any forward-looking statement if and to the extent 
     that the statement--
       ``(1) contains a projection, estimate, or description of 
     future events; and
       ``(2) refers clearly (or is understood by the recipient to 
     refer) to--
       ``(A) such projections, estimates, or descriptions as 
     forward-looking statements; and
       ``(B) the risk that such projections, estimates, or 
     descriptions may not be realized. The safe harbor for 
     forward-looking statements established under this subsection 
     shall be in addition to any safe harbor the Commission may 
     establish by rule or regulation.
       ``(b) Definition of Forward-Looking Statement.--For the 
     purpose of this section, the term `forward-looking statement' 
     shall include (but not be limited to) projections, estimates, 
     and descriptions of future events, whether made orally or in 
     writing, voluntarily or otherwise.
       ``(c) No Duty To Make Continuing Projections.--In any 
     private action arising under this title, no person shall be 
     deemed to have any obligation to update a forward-looking 
     statement made by such person unless such person has 
     expressly and substantially contemporaneously undertaken to 
     update such statement.
       ``(d) Automatic Procedure for Staying Discovery; Expedited 
     Procedure for Consideration of Motion on Applicability of 
     Safe Harbor.--
       ``(1) Stay pending decision on motion.--Upon motion by a 
     defendant to dismiss on the ground that the statement or 
     omission upon which the complaint is based is a forward-
     looking statement within the meaning of this section and that 
     the safe harbor provisions of this section preclude a claim 
     for relief, the court shall stay discovery until such motion 
     is decided.
       ``(2) Protective orders.--If the court denies a motion to 
     dismiss to which paragraph (1) is applicable, or if no such 
     motion is made and a party makes a motion for a protective 
     order, at any time beginning after the filing of the 
     complaint and ending 10 days after the filing of such party's 
     answer to the complaint, asserting that the safe harbor 
     provisions of this section apply to the action, a protective 
     order shall issue forthwith to stay all discovery as to any 
     party to whom the safe harbor provisions of this section may 
     apply, except that which is directed to the specific issue of 
     the applicability of the safe harbor. A hearing on the 
     applicability of the safe harbor shall be conducted within 45 
     days of the issuance of the protective order. At the 
     conclusion of the hearing, the court shall either dismiss the 
     portion of the action based upon the use of the forward-
     looking information or determine that the safe harbor is 
     unavailable in the circumstances.
       ``(e) Regulatory Authority.--The Commission shall exercise 
     its authority to describe conduct with respect to the making 
     of forward-looking statements that will be deemed not to 
     provide a basis for liability in private actions under this 
     title. Such rules and regulations shall--
       ``(1) include clear and objective guidance that the 
     Commission finds sufficient for the protection of investors;
       ``(2) prescribe such guidance with sufficient particularity 
     that compliance shall be readily ascertainable by issuers 
     prior to issuance of securities; and
       ``(3) provide that forward-looking statements that are in 
     compliance with such guidance and that concern the future 
     economic performance of an issuer of securities registered 
     under section 12 of this title will be deemed not to be in 
     violation of this title. Nothing in this section shall be 
     deemed to limit, either expressly or by implication, the 
     authority of the Commission to exercise similar authority or 
     to adopt similar rules and regulations with respect to 
     forward-looking statements under other statutes under which 
     the Commission exercises rule-making authority.''. 
       Page 28, after line 2, insert the following new section 
     (and redesignate the succeeding sections and conform the 
     table of contents accordingly).

     SEC. 6. FINANCIAL FRAUD DETECTION AND DISCLOSURE.

       (a) Amendments to the Securities Exchange Act of 1934.--The 
     Securities Exchange Act of 1934 is amended by inserting after 
     section 13 (15 U.S.C. 78m) the following new section:

     ``SEC. 13A. FRAUD DETECTION AND DISCLOSURE.

       ``(a) Audit Requirements.--Each audit required pursuant to 
     this title of an issuer's financial statements by an 
     independent public accountant shall include, in accordance 
     with generally accepted auditing standards, as may be 
     modified or supplemented from time to time by the Commission, 
     the following:
       ``(1) procedures designed to provide reasonable assurance 
     of detecting illegal acts that would have a direct and 
     material effect on the determination of financial statement 
     amounts;
       ``(2) procedures designed to identify related party 
     transactions which are material to the financial statements 
     or otherwise require disclosure therein; and
       ``(3) an evaluation of whether there is substantial doubt 
     about the issuer's ability to continue as a going concern 
     over the ensuing fiscal year.
       ``(b) Required Response to Audit Discoveries.--
       ``(1) Investigation and report to management.--If, in the 
     course of conducting any audit pursuant to this title to 
     which subsection (a) applies, the independent public 
     accountant detects or otherwise becomes aware of information 
     indicating that an illegal act (whether or not perceived to 
     have a material effect on the issuer's financial statements) 
     has or may have occurred, the accountant shall, in accordance 
     with generally accepted auditing standards, as may be 
     modified or supplemented from time to time by the 
     Commission--
       ``(A)(i) determine whether it is likely that an illegal act 
     has occurred, and (ii) if so, determine and consider the 
     possible effect of the illegal act on the financial 
     statements of the issuer, including any contingent monetary 
     effects, such as fines, penalties, and damages; and
       ``(B) as soon as practicable inform the appropriate level 
     of the issuer's management and assure that the issuer's audit 
     committee, or the issuer's board of directors in the absence 
     of such a committee, is adequately informed with respect to 
     illegal acts that have been detected or otherwise come to the 
     attention of such accountant in the course of the audit, 
     unless the illegal act is clearly inconsequential.
       ``(2) Response to failure to take remedial action.--If, 
     having first assured itself that the audit committee of the 
     board of directors of the issuer or the board (in the absence 
     of an audit committee) is adequately informed with respect to 
     illegal acts that have been detected or otherwise come to the 
     accountant's attention in the course of such accountant's 
     audit, the independent public accountant concludes that--
       ``(A) any such illegal act has a material effect on the 
     financial statements of the issuer,
       ``(B) senior management has not taken, and the board of 
     directors has not caused senior management to take, timely 
     and appropriate remedial actions with respect to such illegal 
     act, and
       ``(C) the failure to take remedial action is reasonably 
     expected to warrant departure from a standard auditor's 
     report, when made, or warrant resignation from the audit 
     engagement,

     the independent public accountant shall, as soon as 
     practicable, directly report its conclusions to the board of 
     directors.
       ``(3) Notice to commission; response to failure to 
     notify.--An issuer whose board of directors has received a 
     report pursuant to paragraph (2) shall inform the Commission 
     by notice within one business day of receipt of such report 
     and shall furnish the independent public accountant making 
     such report with a copy of the notice furnished the 
     Commission. If the independent public accountant making such 
     report shall fail to receive a copy of such notice within the 
     required one-business-day period, the independent public 
     accountant shall--
       ``(A) resign from the engagement; or
       ``(B) furnish to the Commission a copy of its report (or 
     the documentation of any oral report given) within the next 
     business day following such failure to receive notice.
       ``(4) Report after resignation.--An independent public 
     accountant electing resignation shall, within the one 
     business day following a failure by an issuer to notify the 
     Commission under paragraph (3), furnish to the Commission a 
     copy of the accountant's report (or the documentation of any 
     oral report given).
       ``(c) Auditor Liability Limitation.--No independent public 
     accountant shall be lia

[[Page 351]]

     ble in a private action for any finding, conclusion, or 
     statement expressed in a report made pursuant to paragraph 
     (3) or (4) of subsection (b), including any rules promulgated 
     pursuant thereto.
       ``(d) Civil Penalties in Cease-and-Desist Proceedings.--If 
     the Commission finds, after notice and opportunity for 
     hearing in a proceeding instituted pursuant to section 21C of 
     this title, that an independent public accountant has 
     willfully violated paragraph (3) or (4) of subsection (b) of 
     this section, then the Commission may, in addition to 
     entering an order under section 21C, impose a civil penalty 
     against the independent public accountant and any other 
     person that the Commission finds was a cause of such 
     violation. The determination whether to impose a civil 
     penalty, and the amount of any such penalty, shall be 
     governed by the standards set forth in section 21B of this 
     title.
       ``(e) Preservation of Existing Authority.--Except for 
     subsection (d), nothing in this section limits or otherwise 
     affects the authority of the Commission under this title.
       ``(f) Definitions.--As used in this section, the term 
     `illegal act' means any action or omission to act that 
     violates any law, or any rule or regulation having the force 
     of law.''.
       ``(b) Effective Dates.--As to any registrant that is 
     required to file selected quarterly financial data pursuant 
     to item 302(a) of Regulation S-K (17 CFR 229.302(a)) of the 
     Securities and Exchange Commission, the amendments made by 
     subsection (a) of this section shall apply to any annual 
     report for any period beginning on or after January 1, 1996. 
     As to any other registrant, such amendment shall apply for 
     any period beginning on or after January 1, 1997.

  The bill, as amended, was ordered to be engrossed and read a third 
time, was read a third time by title.
  Mr. MARKEY moved to recommit the bill to the Committee on Commerce 
with instructions to report the bill back to the House forthwith with 
the following amendments:

       Page 7, beginning on line 19, strike subsection (c) through 
     page 11, line 8, and insert the following:
       ``(c) Award of Fees and Expenses.--
       ``(1) Authority to award fees and expenses.--If the court 
     in any private action arising under this title enters a final 
     judgment against a party litigant on the basis of a default, 
     a motion to dismiss, motion for summary judgment, or a trial 
     on the merits, the court shall, upon motion by the prevailing 
     party, determine whether--
       ``(A) the compliant or motion is being presented for any 
     improper purpose, such as to harass or to cause unnecessary 
     delay or needless increase in the cost of litigation;
       ``(B) the claims, defenses, and other legal contentions in 
     the complaint or motion, taken as a whole, are unwarranted by 
     existing law of by a nonfrivolous argument for the extension, 
     modification, or reversal of existing law or the 
     establishment of new law;
       ``(C) the allegations and other factual contentions in the 
     complaint or motion, taken as a whole, lack any evidentiary 
     support or would be likely to lack any evidentiary support 
     after a reasonable opportunity for further investigation or 
     discovery; or
       ``(D) the denials of factual contentions are unwarranted on 
     the evidence or are not reasonably based on a lack of 
     information or belief.
       ``(2) Award to prevailing party.--If the court determines 
     that the losing party has violated any subparagraph (1), the 
     court shall award the prevailing party reasonable fees and 
     other expenses incurred by that party. The determination of 
     whether the losing party violated any such subparagraph shall 
     be made on the basis of the record in the civil action for 
     which fees and other expenses are sought.
       ``(3) Application for fees.--A party seeking an award of 
     fees and other expenses shall, within 30 days of a final, non 
     appealable judgment in the action submit to the court an 
     application for fees and other expenses that verifies that 
     the party is entitled to such an award under paragraph (1) 
     and the amount sought, including an itemized statement from 
     any attorney or expert witness representing or appearing on 
     behalf of the party stating the actual time expended and the 
     rate at which fees and other expenses are computed.
       ``(4) Sanctions against attorney.--The court----
       ``(A) shall award the fees and expenses against the 
     attorney for the losing party unless the court determines 
     that the losing party was principally responsible for the 
     actions described in subparagraph (A), (B), (C), or (D) of 
     paragraph (1); and
       ``(B) may, in its discretion, reduce the amount to be 
     awarded pursuant to this section, or deny an award, to the 
     extent that the prevailing party during the course of the 
     proceedings engaged in conduct that unduly and unreasonably 
     protracted the final resolution of the matter in controversy.
       ``(5) Rule of construction.--Nothing in this subsection 
     shall be construed to limit or impair the discretion of the 
     court to award costs pursuant to other provisions of law.
       ``(6) Definitions.--For purpose of this subsection, the 
     term `fees and other expenses' includes the reasonable 
     expenses of expert witnesses, the reasonable cost of any 
     study, analysis, report, test, or project which is found by 
     the court to be necessary for the preparation of the party's 
     case, and reasonable attorney fees and expenses. The amount 
     of fees awarded under this section shall be based upon 
     prevailing market rates for the kind and quality of services 
     furnished.

       Page 28, line 12, insert before the period the following: 
     ``, except that this Act and the amendments made by this Act 
     shall not apply to any action commenced by any State or local 
     government, or any agency or instrumentality of any State or 
     local government, before the date which is 3 years after such 
     date of enactment.''.

  After debate,
  By unanimous consent, the previous question was ordered on the motion 
to recommit with instructions.
  The question being put, viva voce,
  Will the House recommit said bill with instructions?
  The SPEAKER pro tempore, Mr. McINNIS, announced that the nays had it.
  Mr. MARKEY demanded a recorded vote on agreeing to said motion, which 
demand was supported by one-fifth of a quorum, so a recorded vote was 
ordered.
  The vote was taken by electronic device.

Yeas

172

It was decided in the

Nays

251

negative

Answered present

1
```