II 

115TH CONGRESS 

2D SESSION S. 3004 

To amend the Sarbanes-Oxley Act of 2002 to exclude privately held, noncustody brokers and dealers that are in good standing from certain 

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

IN THE SENATE OF THE UNITED STATES 

JUNE 6, 2018 

Mr. COTTON (for himself and Mr. JONES) introduced the following bill; which 

was read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

A BILL 

To amend the Sarbanes-Oxley Act of 2002 to exclude 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 2018’’. 


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1 SEC. 2. EXEMPTION. 

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

3 2002.—Title I of the Sarbanes-Oxley Act of 2002 (15 

4 U.S.C. 7211 et seq.) is amended— 

5 (1) in section 101(e)(1) (15 U.S.C. 7211(e)(1)), 

6 by striking ‘‘brokers, and dealers’’ and inserting 

7 ‘‘brokers, dealers, and non-custody brokers or deal8 ers that are privately held and in good standing’’; 

9 and 

10 (2) in section 110 (15 U.S.C. 7220)— 

11 (A) in paragraph (3)— 

12 (i) by striking ‘‘The term’’ and insert13 ing ‘‘Except as otherwise expressly pro14 vided, the term’’; and 

15 (ii) by inserting ‘‘, except that the 

16 term does not include a non-custody broker 

17 or dealer that is privately held and in good 

18 standing’’ after ‘‘registered public account19 ing firm’’; 

20 (B) in paragraph (4)— 

21 (i) by striking ‘‘The term’’ and insert22 ing ‘‘Except as otherwise expressly pro23 vided, the term’’; and 

24 (ii) by inserting ‘‘, except that the 

25 term does not include a non-custody broker 

26 or dealer that is privately held and in good 


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1 standing’’ after ‘‘registered public account2 ing firm’’; 

3 (C) by redesignating paragraphs (5) and 

4 (6) as paragraphs (8) and (9), respectively; and 

5 (D) by inserting after paragraph (4) the 

6 following: 

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

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

9 (as those terms are defined in section 3(a) of the Se10 curities Exchange Act of 1934 (15 U.S.C. 78c(a))), 

11 that, as of the last day of the most recently com12 pleted fiscal year of the broker or dealer, as applica13 ble, the broker or dealer— 

14 ‘‘(A) was registered with the Commission; 

15 ‘‘(B) was licensed by, and registered with, 

16 the Financial Industry Regulatory Authority or 

17 a national securities exchange that is registered 

18 with the Commission under section 6 of the Se19 curities Exchange Act of 1934 (15 U.S.C. 78f); 

20 ‘‘(C) was compliant with the minimum dol21 lar net capital requirements under section 

22 240.15c3–1 of title 17, Code of Federal Regula23 tions, or any successor regulation; 


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1 ‘‘(D) had not, during the 10-year period 

2 preceding that date, been convicted of a felony 

3 under Federal or State law; and 

4 ‘‘(E) was not barred from registering, or 

5 had not been expelled from registration, with 

6 the Commission, the Financial Industry Regu7 latory Authority, the Commodity Futures Trad8 ing Commission, or any State regulatory agen9 cy, without regard to whether the broker or 

10 dealer had, as of that date, filed an appeal chal11 lenging such a bar or expulsion, as applicable. 

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

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

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

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

16 78c(a))), as applicable, that— 

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

18 completed fiscal year of the broker or dealer— 

19 ‘‘(i) had not less than 1 and not more 

20 than 150 registered persons holding a se21 curities license registered with the broker 

22 or dealer; 

23 ‘‘(ii) cleared each eligible transaction 

24 with and for a consumer on a fully dis25 closed basis with a clearing broker or dealVerDate Sep 11 2014 17:58 Jun 07, 2018 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3004.IS S3004

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1 er or a member of a national securities ex2 change that is registered with the Commis3 sion under section 6 of the Securities Ex4 change Act of 1934 (15 U.S.C. 78f); 

5 ‘‘(iii) did not, as a matter of ordinary 

6 business practice in connection with the ac7 tivities of the broker or dealer, elect to re8 ceive customer checks, drafts, or other evi9 dence of indebtedness made payable to the 

10 broker or dealer or a person other than the 

11 requisite registered broker or dealer car12 rying the account of a customer, escrow 

13 agent, issuer, underwriter, sponsor, or 

14 other distributor of securities; 

15 ‘‘(iv) did not otherwise hold funds or 

16 securities for customers; and 

17 ‘‘(v) if required under section 3(a)(2) 

18 of the Securities Investor Protection Act of 

19 1970 (15 U.S.C. 78ccc(a)(2)), was a mem20 ber of the Securities Investor Protection 

21 Corporation; and 

22 ‘‘(B) during the most recently completed 

23 fiscal year of the broker or dealer, claimed ex24 emption from section 240.15c3–3 of title 17, 


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1 Code of Federal Regulations, or any successor 

2 regulation. 

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

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

5 those terms are defined in section 3(a) of the Securi6 ties Exchange Act of 1934 (15 U.S.C. 78c(a))), that 

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

8 issuer.’’. 

9 (b) AMENDMENTS TO REGULATIONS.—Not later 

10 than 60 days after the date of enactment of this Act, the 

11 Securities and Exchange Commission shall make any nec12 essary amendments to regulations of the Commission that 

13 are in effect as of the date of enactment of this Act in 

14 order to carry out this Act and the amendments made by 

15 this Act. 

16 (c) EFFECTIVE DATE.—This Act, and the amend17 ments made by this Act, shall take effect on the date that 

18 is 60 days after the date of enactment of this Act. 

Æ 


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