H. R. 3763—23
(A) section 105(e) of this Act (rather than that section
19(d)(2)) shall govern the extent to which application for,
or institution by the Commission on its own motion of,
review of any disciplinary action of the Board operates
as a stay of such action;
(B) references in that section 19(e)(1) to ‘‘members’’
of such an organization shall be deemed to be references
to registered public accounting firms;
(C) the phrase ‘‘consistent with the purposes of this
title’’ in that section 19(e)(1) shall be deemed to read ‘‘con-
sistent with the purposes of this title and title I of the
Sarbanes-Oxley Act of 2002’’;
(D) references to rules of the Municipal Securities Rule-
making Board in that section 19(e)(1) shall not apply; and
(E) the reference to section 19(e)(2) of the Securities
Exchange Act of 1934 shall refer instead to section 107(c)(3)
of this Act.
(3) COMMISSION MODIFICATION AUTHORITY.—The Commis-
sion may enhance, modify, cancel, reduce, or require the remis-
sion of a sanction imposed by the Board upon a registered
public accounting firm or associated person thereof, if the
Commission, having due regard for the public interest and
the protection of investors, finds, after a proceeding in accord-
ance with this subsection, that the sanction—
(A) is not necessary or appropriate in furtherance of
this Act or the securities laws; or
(B) is excessive, oppressive, inadequate, or otherwise
not appropriate to the finding or the basis on which the
sanction was imposed.
(d) CENSURE OF THE BOARD; OTHER SANCTIONS.—
(1) RESCISSION OF BOARD AUTHORITY.—The Commission,
by rule, consistent with the public interest, the protection of
investors, and the other purposes of this Act and the securities
laws, may relieve the Board of any responsibility to enforce
compliance with any provision of this Act, the securities laws,
the rules of the Board, or professional standards.
(2) CENSURE OF THE BOARD; LIMITATIONS.—The Commission
may, by order, as it determines necessary or appropriate in
the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of this Act or the securities
laws, censure or impose limitations upon the activities, func-
tions, and operations of the Board, if the Commission finds,
on the record, after notice and opportunity for a hearing, that
the Board—
(A) has violated or is unable to comply with any provi-
sion of this Act, the rules of the Board, or the securities
laws; or
(B) without reasonable justification or excuse, has
failed to enforce compliance with any such provision or
rule, or any professional standard by a registered public
accounting firm or an associated person thereof.
(3) CENSURE OF BOARD MEMBERS; REMOVAL FROM OFFICE.—
The Commission may, as necessary or appropriate in the public
interest, for the protection of investors, or otherwise in further-
ance of the purposes of this Act or the securities laws, remove
H. R. 3763—24
from office or censure any member of the Board, if the Commis-
sion finds, on the record, after notice and opportunity for a
hearing, that such member—
(A) has willfully violated any provision of this Act,
the rules of the Board, or the securities laws;
(B) has willfully abused the authority of that member;
or
(C) without reasonable justification or excuse, has
failed to enforce compliance with any such provision or
rule, or any professional standard by any registered public
accounting firm or any associated person thereof.
SEC. 108. ACCOUNTING STANDARDS.
(a) AMENDMENT TO SECURITIES ACT OF 1933.—Section 19 of
the Securities Act of 1933 (15 U.S.C. 77s) is amended—
(1) by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively; and
(2) by inserting after subsection (a) the following:
‘‘(b) RECOGNITION OF ACCOUNTING STANDARDS.—
‘‘(1) IN GENERAL.—In carrying out its authority under sub-
section (a) and under section 13(b) of the Securities Exchange
Act of 1934, the Commission may recognize, as ‘generally
accepted’ for purposes of the securities laws, any accounting
principles established by a standard setting body—
‘‘(A) that—
‘‘(i) is organized as a private entity;
‘‘(ii) has, for administrative and operational pur-
poses, a board of trustees (or equivalent body) serving
in the public interest, the majority of whom are not,
concurrent with their service on such board, and have
not been during the 2-year period preceding such
service, associated persons of any registered public
accounting firm;
‘‘(iii) is funded as provided in section 109 of the
Sarbanes-Oxley Act of 2002;
‘‘(iv) has adopted procedures to ensure prompt
consideration, by majority vote of its members, of
changes to accounting principles necessary to reflect
emerging accounting issues and changing business
practices; and
‘‘(v) considers, in adopting accounting principles,
the need to keep standards current in order to reflect
changes in the business environment, the extent to
which international convergence on high quality
accounting standards is necessary or appropriate in
the public interest and for the protection of investors;
and
‘‘(B) that the Commission determines has the capacity
to assist the Commission in fulfilling the requirements
of subsection (a) and section 13(b) of the Securities
Exchange Act of 1934, because, at a minimum, the standard
setting body is capable of improving the accuracy and
effectiveness of financial reporting and the protection of
investors under the securities laws.
H. R. 3763—25
‘‘(2) ANNUAL REPORT.—A standard setting body described
in paragraph (1) shall submit an annual report to the Commis-
sion and the public, containing audited financial statements
of that standard setting body.’’.
(b) COMMISSION AUTHORITY.—The Commission shall promul-
gate such rules and regulations to carry out section 19(b) of the
Securities Act of 1933, as added by this section, as it deems nec-
essary or appropriate in the public interest or for the protection
of investors.
(c) NO EFFECT ON COMMISSION POWERS.—Nothing in this Act,
including this section and the amendment made by this section,
shall be construed to impair or limit the authority of the Commis-
sion to establish accounting principles or standards for purposes
of enforcement of the securities laws.
(d) STUDY
AND
REPORT
ON
ADOPTING
PRINCIPLES-BASED
ACCOUNTING.—
(1) STUDY.—
(A) IN
GENERAL.—The Commission shall conduct a
study on the adoption by the United States financial
reporting system of a principles-based accounting system.
(B) STUDY TOPICS.—The study required by subpara-
graph (A) shall include an examination of—
(i) the extent to which principles-based accounting
and financial reporting exists in the United States;
(ii) the length of time required for change from
a rules-based to a principles-based financial reporting
system;
(iii) the feasibility of and proposed methods by
which a principles-based system may be implemented;
and
(iv) 
a 
thorough 
economic 
analysis 
of 
the
implementation of a principles-based system.
(2) REPORT.—Not later than 1 year after the date of enact-
ment of this Act, the Commission shall submit a report on
the results of the study required by paragraph (1) to the Com-
mittee on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Financial Services of the House of Rep-
resentatives.
SEC. 109. FUNDING.
(a) IN GENERAL.—The Board, and the standard setting body
designated pursuant to section 19(b) of the Securities Act of 1933,
as amended by section 108, shall be funded as provided in this
section.
(b) ANNUAL BUDGETS.—The Board and the standard setting
body referred to in subsection (a) shall each establish a budget
for each fiscal year, which shall be reviewed and approved according
to their respective internal procedures not less than 1 month prior
to the commencement of the fiscal year to which the budget pertains
(or at the beginning of the Board’s first fiscal year, which may
be a short fiscal year). The budget of the Board shall be subject
to approval by the Commission. The budget for the first fiscal
year of the Board shall be prepared and approved promptly fol-
lowing the appointment of the initial five Board members, to permit
action by the Board of the organizational tasks contemplated by
section 101(d).
(c) SOURCES AND USES OF FUNDS.—
H. R. 3763—26
(1) RECOVERABLE BUDGET EXPENSES.—The budget of the
Board (reduced by any registration or annual fees received
under section 102(e) for the year preceding the year for which
the budget is being computed), and all of the budget of the
standard setting body referred to in subsection (a), for each
fiscal year of each of those 2 entities, shall be payable from
annual accounting support fees, in accordance with subsections
(d) and (e). Accounting support fees and other receipts of the
Board and of such standard-setting body shall not be considered
public monies of the United States.
(2) FUNDS GENERATED FROM THE COLLECTION OF MONETARY
PENALTIES.—Subject to the availability in advance in an appro-
priations Act, and notwithstanding subsection (i), all funds
collected by the Board as a result of the assessment of monetary
penalties shall be used to fund a merit scholarship program
for undergraduate and graduate students enrolled in accredited
accounting degree programs, which program is to be adminis-
tered by the Board or by an entity or agent identified by
the Board.
(d) ANNUAL ACCOUNTING SUPPORT FEE FOR THE BOARD.—
(1) ESTABLISHMENT OF FEE.—The Board shall establish,
with the approval of the Commission, a reasonable annual
accounting support fee (or a formula for the computation
thereof), as may be necessary or appropriate to establish and
maintain the Board. Such fee may also cover costs incurred
in the Board’s first fiscal year (which may be a short fiscal
year), or may be levied separately with respect to such short
fiscal year.
(2) ASSESSMENTS.—The rules of the Board under paragraph
(1) shall provide for the equitable allocation, assessment, and
collection by the Board (or an agent appointed by the Board)
of the fee established under paragraph (1), among issuers,
in accordance with subsection (g), allowing for differentiation
among classes of issuers, as appropriate.
(e) ANNUAL ACCOUNTING SUPPORT FEE FOR STANDARD SETTING
BODY.—The annual accounting support fee for the standard setting
body referred to in subsection (a)—
(1) shall be allocated in accordance with subsection (g),
and assessed and collected against each issuer, on behalf of
the standard setting body, by 1 or more appropriate designated
collection agents, as may be necessary or appropriate to pay
for the budget and provide for the expenses of that standard
setting body, and to provide for an independent, stable source
of funding for such body, subject to review by the Commission;
and
(2) may differentiate among different classes of issuers.
(f) LIMITATION ON FEE.—The amount of fees collected under
this section for a fiscal year on behalf of the Board or the standards
setting body, as the case may be, shall not exceed the recoverable
budget expenses of the Board or body, respectively (which may
include operating, capital, and accrued items), referred to in sub-
section (c)(1).
(g) ALLOCATION
OF
ACCOUNTING
SUPPORT
FEES
AMONG
ISSUERS.—Any amount due from issuers (or a particular class of
issuers) under this section to fund the budget of the Board or
the standard setting body referred to in subsection (a) shall be
allocated among and payable by each issuer (or each issuer in