I 

116TH CONGRESS 

2D SESSION H. R. 8983 

To amend the Sarbanes-Oxley Act of 2002 to exclude the audits of privately 

held, non-custody brokers and dealers that are in good standing from 

certain requirements under title I of that Act, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 16, 2020 

Mr. HILL of Arkansas introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend the Sarbanes-Oxley Act of 2002 to exclude the 

audits of privately held, non-custody brokers and dealers 

that are in good standing from certain requirements 

under title I of 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 ‘‘Small Business Audit 

5 Correction Act of 2020’’. 


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1 SEC. 2. EXEMPTION. 

2 (a) AMENDMENTS TO THE SARBANES-OXLEY ACT OF

3 2002.—Section 110 of the Sarbanes-Oxley Act of 2002 

4 (15 U.S.C. 7220) is amended— 

5 (1) in paragraph (3), by inserting ‘‘, except that 

6 the term does not include a non-custody broker or 

7 dealer that is privately held and in good standing’’ 

8 after ‘‘registered public accounting firm’’; 

9 (2) in paragraph (4), by inserting ‘‘, except that 

10 the term does not include a non-custody broker or 

11 dealer that is privately held and in good standing’’ 

12 after ‘‘registered public accounting firm’’; 

13 (3) by redesignating paragraphs (5) and (6) as 

14 paragraphs (8) and (9), respectively; and 

15 (4) by inserting after paragraph (4) the fol16 lowing: 

17 ‘‘(5) IN GOOD STANDING.—The term ‘in good 

18 standing’ means, with respect to a broker or dealer 

19 (as those terms are defined in section 3(a) of the Se20 curities Exchange Act of 1934 (15 U.S.C. 78c(a))), 

21 that, as of the last day of the most recently com22 pleted fiscal year of the broker or dealer, as applica23 ble, the broker or dealer— 

24 ‘‘(A) is registered with the Commission; 

25 ‘‘(B) is a member of an association that is 

26 registered as a national securities association 


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1 under section 15A of the Securities Exchange 

2 Act of 1934 (15 U.S.C. 78o–3); 

3 ‘‘(C) is compliant with the minimum dollar 

4 net capital requirements under section 

5 240.15c3–1 of title 17, Code of Federal Regula6 tions, or any successor regulation; 

7 ‘‘(D) has not, during the 10-year period 

8 preceding that date, been convicted of a felony 

9 under Federal or State law; 

10 ‘‘(E) does not have a person associated 

11 with the broker or dealer, as defined in section 

12 3(a) of the Securities Exchange Act of 1934 

13 (15 U.S.C. 78c(a)), that, during the 10-year pe14 riod preceding that date, has been convicted of 

15 a felony for fraudulent conduct under Federal 

16 or State law; and 

17 ‘‘(F) is not subject to statutory disquali18 fication by reason of being— 

19 ‘‘(i) expelled or suspended from— 

20 ‘‘(I) an association that is reg21 istered as described in subparagraph 

22 (B); or 

23 ‘‘(II) an association that is reg24 istered as a registered futures associaVerDate Sep 11 2014 00:47 Dec 31, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8983.IH H8983

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1 tion under section 17 of the Com2 modity Exchange Act (7 U.S.C. 21); 

3 ‘‘(ii) subject to an order of the Com4 mission, other appropriate regulatory agen5 cy, or foreign financial regulatory authority 

6 denying, suspending, or revoking the reg7 istration of the broker or dealer as a regu8 lated entity; 

9 ‘‘(iii) subject to an order of the Com10 modity Futures Trading Commission, or 

11 other appropriate regulatory entity, deny12 ing, suspending, or revoking the registra13 tion of the broker or dealer under the 

14 Commodity Exchange Act (7 U.S.C. 1 et 

15 seq.) or the authority of the broker or deal16 er to engage in any transaction; or 

17 ‘‘(iv) subject to a restraining order en18 tered by a court. 

19 ‘‘(6) NON-CUSTODY BROKER OR DEALER.—The 

20 term ‘non-custody broker or dealer’ means a broker 

21 or dealer (as those terms are defined in section 3(a) 

22 of the Securities Exchange Act of 1934 (15 U.S.C. 

23 78c(a))), as applicable, that— 

24 ‘‘(A) as of the last day of the most recently 

25 completed fiscal year of the broker or dealer— 


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1 ‘‘(i) has not less than one and not 

2 more than 150 persons registered with an 

3 association that is registered as a national 

4 securities association under section 15A of 

5 the Securities Exchange Act of 1934 (15 

6 U.S.C. 78o–3); 

7 ‘‘(ii) is not a high frequency trading 

8 broker or dealer, as that term is defined by 

9 the Commission with respect to a par10 ticular registered firm type; and 

11 ‘‘(iii) is not affiliated with an invest12 ment advisor that— 

13 ‘‘(I) is registered with the Com14 mission or a State entity; and 

15 ‘‘(II) acts as the custodian for 

16 customer assets; 

17 ‘‘(B) with respect to the average of the 

18 three most recently completed fiscal years of 

19 the broker or dealer, has gross revenue that en20 ables the broker or dealer to qualify as a small 

21 business concern for the purposes of a program 

22 administered by the Small Business Adminis23 tration; and 

24 ‘‘(C) throughout the most recently com25 pleted fiscal year of the broker or dealer— 


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1 ‘‘(i) does not, as a matter of ordinary 

2 business practice in connection with the ac3 tivities of the broker or dealer, receive cus4 tomer checks, drafts, or other evidence of 

5 indebtedness made payable to the broker 

6 or dealer; 

7 ‘‘(ii) if required under section 3(a)(2) 

8 of the Securities Investor Protection Act of 

9 1970 (15 U.S.C. 78ccc(a)(2)), is a member 

10 of the Securities Investor Protection Cor11 poration; and 

12 ‘‘(iii) either— 

13 ‘‘(I) if the broker or dealer is 

14 subject to section 240.15c3–3 of title 

15 17, Code of Federal Regulations, or 

16 any successor regulation, is in compli17 ance with that section; or 

18 ‘‘(II) is not subject to such sec19 tion 240.15c3–3, or any successor 

20 regulation, because the broker or deal21 er does not maintain custody over any 

22 customer securities or cash. 

23 ‘‘(7) PRIVATELY HELD.—The term ‘privately 

24 held’ means, with respect to a broker or dealer (as 

25 those terms are defined in section 3(a) of the SecuriVerDate Sep 11 2014 00:47 Dec 31, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8983.IH H8983

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1 ties Exchange Act of 1934 (15 U.S.C. 78c(a))), that 

2 the broker or dealer, as applicable, is not an 

3 issuer.’’. 

4 (b) AMENDMENTS TO REGULATIONS.— 

5 (1) DEFINITIONS.—In this subsection, the 

6 terms ‘‘in good standing’’, ‘‘non-custody broker or 

7 dealer’’, and ‘‘privately held’’ have the meanings 

8 given the terms in section 110 of the Sarbanes-Oxley 

9 Act of 2002 (15 U.S.C. 7220), as amended by sub10 section (a). 

11 (2) AMENDMENTS.—Not later than 180 days 

12 after the date of enactment of this Act, the Securi13 ties and Exchange Commission shall make any nec14 essary amendments to regulations of the Commis15 sion that are in effect as of the date of enactment 

16 of this Act in order to— 

17 (A) carry out this Act and the amend18 ments made by this Act; and 

19 (B) exclude the auditors of non-custody 

20 brokers or dealers that are privately held and in 

21 good standing from the audit requirements of 

22 the Public Company Accounting Oversight 

23 Board. 


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1 (c) EFFECTIVE DATE.—This Act, and the amend2 ments made by this Act, shall take effect on the date that 

3 is 180 days after the date of enactment of this Act. 

Æ 


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