Document ID: SEC-2011-1274-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Order Approving Proposed Board Funding Final Rules, etc.: Public Company Accounting Oversight Board
Posted Date: 2011-08-24T04:00Z

[Federal Register Volume 76, Number 164 (Wednesday, August 24, 2011)]
[Notices]
[Pages 52997-52998]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-21599]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65162; File No. PCAOB-2011-02]

Public Company Accounting Oversight Board; Order Approving 
Proposed Board Funding Final Rules for Allocation of the Board's 
Accounting Support Fee Among Issuers, Brokers, and Dealers, and Other 
Amendments to the Board's Funding Rules

August 18, 2011.

I. Introduction

    On June 21, 2011, the Public Company Accounting Oversight Board 
(the ``Board'' or the ``PCAOB'') filed with the Securities and Exchange 
Commission (the ``Commission''), pursuant to Section 107(b) \1\ of the 
Sarbanes-Oxley Act of 2002 (the ``Sarbanes-Oxley Act'') and Section 
19(b)(1) \2\ of the Securities Exchange Act of 1934 (the ``Exchange 
Act''), a proposed rule change (PCAOB-2011-02) relating to the funding 
of the Board's operations (PCAOB Rules 7100 through 7106) and proposed 
amendments to certain definitions that would appear in PCAOB Rule 1001. 
The proposed rule change was published for comment in the Federal 
Register on July 12, 2011.\3\ The Commission received no comment 
letters on the proposed rule change. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 7217(b).
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ Release No. 34-64816 (Jul. 6, 2011) [76 FR 40950 (Jul. 12, 
2011)].
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II. Discussion

    Section 109 \4\ of the Sarbanes-Oxley Act, as originally enacted, 
provided that funds to cover the Board's annual budget (less 
registration and annual fees paid by public accounting firms \5\) would 
be collected from issuers \6\ based on each issuer's relative average, 
monthly equity market capitalization.\7\ The amount due from issuers 
was referred to as the Board's ``accounting support fee.''
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    \4\ 15 U.S.C. 7219.
    \5\ Section 102(f) of the Sarbanes-Oxley Act (15 U.S.C. 7212(f)) 
states that the PCAOB shall assess and collect a registration fee 
and an annual fee from each registered public accounting firm, in 
amounts that are sufficient to cover the costs of processing and 
reviewing registration applications and annual reports.
    \6\ Section 2(a)(7) of the Sarbanes-Oxley Act (15 U.S.C. 
7201(a)(7)) and PCAOB rules define ``issuer'' to mean an issuer (as 
defined in Section 3 of the Exchange Act (15 U.S.C. 78c)), the 
securities of which are registered under Section 12 of the Exchange 
Act (15 U.S.C. 78l), or that is required to file reports under 
Section 15(d) of the Exchange Act (15 U.S.C. 78o(d)), or that files 
or has filed a registration statement that has not yet become 
effective under the Securities Act of 1933 (15 U.S.C. 77a et seq., 
and that it has not withdrawn. See PCAOB Rule 1001(i)(iii).
    \7\ Section 109(g) of the Sarbanes-Oxley Act.
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    Section 982 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Dodd-Frank Act'') \8\ amended the Sarbanes-Oxley 
Act to grant the Board explicit oversight authority with respect to 
audits of brokers and dealers registered with the Commission.\9\ To 
provide funds for the Board's oversight of those audits, the Dodd-Frank 
Act amended Section 109 of the Sarbanes-Oxley Act to require that the 
Board allocate a portion of the accounting

[[Page 52998]]

support fee among brokers and dealers, or classes of brokers and 
dealers, based on their relative ``net capital (before or after any 
adjustments).'' \10\
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    \8\ Public Law 111-203, 124 Stat. 1376 (Jul. 21, 2010).
    \9\ For information regarding the audit of brokers' and dealers' 
financial statements and examination of reports regarding compliance 
with Commission requirements, see generally Rule 17a-5 under the 
Exchange Act (17 CFR 240.17a-5) and related SEC rules and forms.
    \10\ Sections 109(d)(2) and 109(h) of the Sarbanes-Oxley Act, 
which state, in part, that amounts due from brokers and dealers 
``shall be in proportion to the net capital of the broker or dealer 
(before or after any adjustments).''
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    As amended by the Dodd-Frank Act, Section 109 of the Sarbanes-Oxley 
Act requires that the rules of the Board provide for the equitable 
allocation, assessment, and collection by the Board of the accounting 
support fee among issuers, brokers, and dealers, and allow ``for 
differentiation among classes of issuers, brokers, and dealers, as 
appropriate.'' \11\ This section further provides that ``[t]he amount 
due from a broker or dealer shall be in proportion to the net capital 
of the broker or dealer (before or after any adjustments), compared to 
the total net capital of all brokers and dealers (before or after any 
adjustments), in accordance with rules issued by the Board.'' \12\
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    \11\ Section 109(d)(2) of the Sarbanes-Oxley Act. Pursuant to 
Section 109(e) of the Sarbanes-Oxley Act, the Financial Accounting 
Standards Board (``FASB'') accounting support fee is to be allocated 
among issuers. Brokers and dealers therefore will not be allocated a 
portion of the FASB annual accounting support fee.
    \12\ Section 109(h)(3) of the Sarbanes-Oxley Act.
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    Accordingly, the Board has filed a proposed rule change to its 
funding rules to allocate a portion of the accounting support fee among 
brokers and dealers,\13\ to establish classes of brokers and dealers 
for funding purposes, to describe the methods for allocating the 
appropriate portion of the accounting support fee to each broker and 
dealer within each class, and to address the collection of the assessed 
share of the broker-dealer accounting support fee from brokers and 
dealers.
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    \13\ The PCAOB is amending its rules to add definitions of 
``broker'' and ``dealer'' consistent with the definitions that the 
Dodd-Frank Act added to Section 110 of the Sarbanes-Oxley Act. These 
definitions incorporate the definition of ``broker'' in Section 
3(a)(4) of the Exchange Act and ``dealer'' in Section 3(a)(5) of the 
Exchange Act, but only include those brokers or dealers that are 
required to file a balance sheet, income statement, or other 
financial statement certified by a registered public accounting 
firm. See Sections 110(3) and (4) of the Sarbanes-Oxley Act.
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    In addition, the proposed rule change includes amendments to the 
Board's funding rules with respect to the allocation, assessment, and 
collection of the accounting support fee among issuers. Among other 
things, the proposed rule change:
     Revises the basis for calculating an issuer's market 
capitalization to include the market capitalization of all classes of 
the issuer's voting and non-voting common equity;
     Increases the average, monthly market capitalization 
thresholds in the funding rules for classes of equity issuers and 
investment companies; and
     Includes technical amendments to the Board's funding 
rules.
    Pursuant to Section 109(d)(3) of the Sarbanes-Oxley Act, the PCAOB 
is required to begin the allocation, assessment, and collection of the 
accounting support fee from brokers and dealers to fund the first full 
fiscal year beginning after the date of the enactment of the Dodd-Frank 
Act, which is the Board's 2011 fiscal year. Accordingly, the Board has 
indicated that the amendments to its funding rules are effective for 
the allocation, assessment, and collection of the 2011 broker-dealer 
accounting support fee for brokers and dealers and the 2012 issuer 
accounting support fee for issuers.

III. Conclusion

    After careful review of the proposed rule change, the Commission 
finds that the proposed rule change is consistent with the requirements 
of the Sarbanes-Oxley Act and the securities laws and is necessary or 
appropriate in the public interest or for the protection of investors.
    It is therefore ordered, pursuant to Section 107 of the Sarbanes-
Oxley Act and Section 19(b)(2) of the Exchange Act, that the proposed 
rule change (File No. PCAOB-2011-02) be and hereby is approved.

    For the Commission, by the Office of the Chief Accountant, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-11(b)(2).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21599 Filed 8-23-11; 8:45 am]
BILLING CODE 8011-01-P