I 

116TH CONGRESS 

2D SESSION H. R. 7000 

To amend the Sarbanes-Oxley Act of 2002 to require certain issuers to 

disclose to the Securities and Exchange Commission information regarding foreign jurisdictions that prevent the Public Company Accounting 

Oversight Board from performing inspections under that Act, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 22, 2020 

Mr. SHERMAN introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend the Sarbanes-Oxley Act of 2002 to require certain 

issuers to disclose to the Securities and Exchange Commission information regarding foreign jurisdictions that 

prevent the Public Company Accounting Oversight Board 

from performing inspections under that Act, and for 

other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Holding Foreign Com5 panies Accountable Act’’. 


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1 SEC. 2. DISCLOSURE REQUIREMENT. 

2 Section 104 of the Sarbanes-Oxley Act of 2002 (15 

3 U.S.C. 7214) is amended by adding at the end the fol4 lowing: 

5 ‘‘(i) DISCLOSURE REGARDING FOREIGN JURISDIC6 TIONS THAT PREVENT INSPECTIONS.— 

7 ‘‘(1) DEFINITIONS.—In this subsection— 

8 ‘‘(A) the term ‘covered issuer’ means an 

9 issuer that is required to file reports under sec10 tion 13 or 15(d) of the Securities Exchange Act 

11 of 1934 (15 U.S.C. 78m, 78o(d)); and 

12 ‘‘(B) the term ‘non-inspection year’ means, 

13 with respect to a covered issuer, a year— 

14 ‘‘(i) during which the Commission 

15 identifies the covered issuer under para16 graph (2)(A) with respect to every report 

17 described in subparagraph (A) filed by the 

18 covered issuer during that year; and 

19 ‘‘(ii) that begins after the date of en20 actment of this subsection. 

21 ‘‘(2) DISCLOSURE TO COMMISSION.—The Com22 mission shall— 

23 ‘‘(A) identify each covered issuer that, with 

24 respect to the preparation of the audit report 

25 on the financial statement of the covered issuer 

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1 graph (1)(A) filed by the covered issuer, retains 

2 a registered public accounting firm that has a 

3 branch or office that— 

4 ‘‘(i) is located in a foreign jurisdic5 tion; and 

6 ‘‘(ii) the Board is unable to inspect or 

7 investigate completely because of a position 

8 taken by an authority in the foreign juris9 diction described in clause (i), as deter10 mined by the Board; and 

11 ‘‘(B) require each covered issuer identified 

12 under subparagraph (A) to, in accordance with 

13 the rules issued by the Commission under para14 graph (4), submit to the Commission docu15 mentation that establishes that the covered 

16 issuer is not owned or controlled by a govern17 mental entity in the foreign jurisdiction de18 scribed in subparagraph (A)(i). 

19 ‘‘(3) TRADING PROHIBITION AFTER 3 YEARS OF

20 NON-INSPECTIONS.— 

21 ‘‘(A) IN GENERAL.—If the Commission de22 termines that a covered issuer has 3 consecutive 

23 non-inspection years, the Commission shall pro24 hibit the securities of the covered issuer from 

25 being traded— 


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1 ‘‘(i) on a national securities exchange; 

2 or 

3 ‘‘(ii) through any other method that is 

4 within the jurisdiction of the Commission 

5 to regulate, including through the method 

6 of trading that is commonly referred to as 

7 the ‘over-the-counter’ trading of securities. 

8 ‘‘(B) REMOVAL OF INITIAL PROHIBI9 TION.—If, after the Commission imposes a pro10 hibition on a covered issuer under subpara11 graph (A), the covered issuer certifies to the 

12 Commission that the covered issuer has re13 tained a registered public accounting firm that 

14 the Board has inspected under this section to 

15 the satisfaction of the Commission, the Com16 mission shall end that prohibition. 

17 ‘‘(C) RECURRENCE OF NON-INSPECTION

18 YEARS.—If, after the Commission ends a prohi19 bition under subparagraph (B) or (D) with re20 spect to a covered issuer, the Commission deter21 mines that the covered issuer has a non-inspec22 tion year, the Commission shall prohibit the se23 curities of the covered issuer from being trad24 ed— 


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1 ‘‘(i) on a national securities exchange; 

2 or 

3 ‘‘(ii) through any other method that is 

4 within the jurisdiction of the Commission 

5 to regulate, including through the method 

6 of trading that is commonly referred to as 

7 the ‘over-the-counter’ trading of securities. 

8 ‘‘(D) REMOVAL OF SUBSEQUENT PROHIBI9 TION.—If, after the end of the 5-year period be10 ginning on the date on which the Commission 

11 imposes a prohibition on a covered issuer under 

12 subparagraph (C), the covered issuer certifies to 

13 the Commission that the covered issuer will re14 tain a registered public accounting firm that 

15 the Board is able to inspect under this section, 

16 the Commission shall end that prohibition. 

17 ‘‘(4) RULES.—Not later than 90 days after the 

18 date of enactment of this subsection, the Commis19 sion shall issue rules that establish the manner and 

20 form in which a covered issuer shall make a submis21 sion required under paragraph (2)(B).’’. 

22 SEC. 3. ADDITIONAL DISCLOSURE. 

23 (a) DEFINITIONS.—In this section— 


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1 (1) the term ‘‘audit report’’ has the meaning 

2 given the term in section 2(a) of the Sarbanes-Oxley 

3 Act of 2002 (15 U.S.C. 7201(a)); 

4 (2) the term ‘‘Commission’’ means the Securi5 ties and Exchange Commission; 

6 (3) the term ‘‘covered form’’— 

7 (A) means— 

8 (i) the form described in section 

9 249.310 of title 17, Code of Federal Regu10 lations, or any successor regulation; and 

11 (ii) the form described in section 

12 249.220f of title 17, Code of Federal Reg13 ulations, or any successor regulation; and 

14 (B) includes a form that— 

15 (i) is the equivalent of, or substan16 tially similar to, the form described in 

17 clause (i) or (ii) of subparagraph (A); and 

18 (ii) a foreign issuer files with the 

19 Commission under the Securities Exchange 

20 Act of 1934 (15 U.S.C. 78a et seq.) or 

21 rules issued under that Act; 

22 (4) the terms ‘‘covered issuer’’ and ‘‘non-inspec23 tion year’’ have the meanings given the terms in 

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1 Oxley Act of 2002 (15 U.S.C. 7214), as added by 

2 section 2 of this Act; and 

3 (5) the term ‘‘foreign issuer’’ has the meaning 

4 given the term in section 240.3b–4 of title 17, Code 

5 of Federal Regulations, or any successor regulation. 

6 (b) REQUIREMENT.—Each covered issuer that is a 

7 foreign issuer and for which, during a non-inspection year 

8 with respect to the covered issuer, a registered public ac9 counting firm described in subsection (i)(2)(A) of section 

10 104 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214), 

11 as added by section 2 of this Act, has prepared an audit 

12 report shall disclose in each covered form filed by that 

13 issuer that covers such a non-inspection year— 

14 (1) that, during the period covered by the cov15 ered form, such a registered public accounting firm 

16 has prepared an audit report for the issuer; 

17 (2) the percentage of the shares of the issuer 

18 owned by governmental entities in the foreign juris19 diction in which the issuer is incorporated or other20 wise organized; 

21 (3) whether governmental entities in the appli22 cable foreign jurisdiction with respect to that reg23 istered public accounting firm have a controlling fi24 nancial interest with respect to the issuer; 


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1 (4) the name of each official of the Chinese 

2 Communist Party who is a member of the board of 

3 directors of— 

4 (A) the issuer; or 

5 (B) the operating entity with respect to the 

6 issuer; and 

7 (5) whether the articles of incorporation of the 

8 issuer (or equivalent organizing document) contains 

9 any charter of the Chinese Communist Party, in10 cluding the text of any such charter. 

Æ 


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