‘‘(A) JOINT
AND
SEVERAL
LIABILITY.—
Any covered person against whom a final judg-
ment is entered in a private action shall be lia-
ble for damages jointly and severally only if the
trier of fact specifically determines that—
‘‘(i) such covered person knowingly
committed a violation of the securities
laws;
‘‘(ii) the covered person was the audi-
tor of the financial statements of the issuer
of the securities that are the subject of the
class action and such auditor failed to
comply with section 10A by failing to de-
tect and report an illegal act of such issuer
that is the basis of such class action;
‘‘(iii) the covered person was the audi-
tor of the financial statements of such
issuer and such auditor performed any
non-audit functions for such issuer during
the fiscal year in which an alleged violation
of the securities laws occurred; or
‘‘(iv) the issuer of such securities is
insolvent.’’.
(b) UNCOLLECTABLE SHARES.—Section 21D(f)(4) of
such Act is amended by adding at the end the following
new subparagraph:
‘‘(D) INAPPLICABILITY
TO
INSOLVENCY
CASES.—The provisions of this paragraph shall
not apply in any case in which the trier of fact
determines that the issuer of the securities that
are the subject of the class action is insolvent
under paragraph (2)(A)(iv).’’.
(c) DISCLOSURE TO JURIES.—Section 21D(f) of such
Act is further amended—
(1) by striking paragraph (6); and
(2) by redesignating paragraphs (7) through
(10) as paragraphs (6) through (9), respectively.
(d) DEFINITION.—Section 21D(f)(9) of such Act (as
redesignated by subsection (c)(2) of this section) is
amended—
(1) by striking ‘‘and’’ at then end of subpara-
graph (C);
(2) by striking the period at the end of sub-
paragraph (D) and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(E) an auditor shall be considered to have
performed ‘non-audit functions for an issuer’ if
such auditor received any compensation for
services from such issuer for a fiscal year that
did not qualify to be treated as audit fees for
such fiscal year for purposes of item 9(e)(1) of
the schedule 14A of such issuer.’’.
(e) PREVENTION OF STAYS OF DISCOVERY.—
(1) Section 21D(b)(3) of such Act is amended
by adding at the end the following new subpara-
graph:
‘‘(E) 
INAPPLICABILITY
TO
ACTION
AGAINST
AUDITORS.—In any private action
arising under this title against the auditor of
the financial statements of the issuer of the se-
curities that are the subject of such action, dis-
covery and other proceedings shall not be
stayed pursuant to this paragraph.’’.
(2) Section 27(b) of the Securities Act of 1933
(15 U.S.C. 77z–1(b)) is amended by adding at the
end the following new paragraph:
‘‘(5) INAPPLICABILITY
TO
ACTION
AGAINST
AUDITORS.—In any private action arising under this
title against the auditor of the financial statements
of the issuer of the securities that are the subject of
such action, discovery and other proceedings shall
not be stayed pursuant to this subsection.’’.
SEC. 3. RESTORATION OF AIDING AND ABETTING LIABIL-
ITY.
(a) SECURITIES ACT OF 1933.—Section 20 of the Se-
curities Act of 1933 (15 U.S.C. 77t) is amended by adding
at the end the following new subsection:
‘‘(g) PROSECUTION OF PERSONS WHO AID OR ABET
VIOLATIONS.—For purposes of subsections (b) and (d),
any person who knowingly or recklessly provides substan-
tial assistance to another person in the violation of a provi-
sion of this title, or of any rule or regulation hereunder,
shall be deemed to violate such provision to the same ex-
tent as the person to whom such assistance is provided.
No person shall be liable under this subsection based on
an omission or failure to act unless such omission or fail-
ure constituted a breach of a duty owed by such person.’’.
(b) SECURITIES EXCHANGE ACT OF 1934.—Section
20(e) of the Securities Exchange Act of 1934 (15 U.S.C.
78t(e)) is amended to read as follows:
‘‘(e) PROSECUTION OF PERSONS WHO AID OR ABET
VIOLATIONS.—For purposes of subsections (d)(1) and
(d)(3) of section 21, or an action by a self-regulatory orga-
nization, or an express or implied private right of action
under this title, any person who knowingly or recklessly
provides substantial assistance to another person in the
violation of a provision of this title, or of any rule or regu-
lation thereunder, shall be deemed to violate such provi-
sion and shall be liable to the same extent as the person
to whom such assistance is provided. No person shall be
liable under this subsection based on an omission or fail-
ure to act unless such omission or failure constituted a
breach of a duty owed by such person.’’.
(c) INVESTMENT COMPANY ACT OF 1940.—Section
42 of the Investment Company Act of 1940 (15 U.S.C.
80a–41) is amended by adding at the end the following
new subsection:
‘‘(f) PROSECUTION OF PERSONS WHO AID OR ABET
VIOLATIONS.—For purposes of subsections (d) and (e),
any person who knowingly or recklessly provides substan-
tial assistance to another person in the violation of a provi-
sion of this title, or of any rule, regulation, or order here-
under, shall be deemed to violate such provision to the
same extent as the person to whom such assistance is pro-
vided. No person shall be liable under this subsection
based on an omission or failure to act unless such omission
or failure constituted a breach of a duty owed by such
person.’’.
(d) INVESTMENT ADVISERS ACT OF 1940.—Section
209(d) of the Investment Advisers Act of 1940 (15 U.S.C.
80b–9) is amended—
(1) in subsection (d)—
(A) by striking ‘‘or that any person has
aided, abetted, counseled, commanded, induced,
or procured, is aiding, abetting, counseling,
commanding, inducing, or procuring, or is
about to aid, abet, counsel, command, induce,
or procure such a violation,’’; and
(B) by striking ‘‘or in aiding, abetting,
counseling, commanding, inducing, or procuring
any such act or practice’’; and
(2) by adding at the end the following new sub-
section:
‘‘(f) PROSECUTION OF PERSONS WHO AID OR ABET
VIOLATIONS.—For purposes of subsections (d) and (e),
any person who knowingly or recklessly provides substan-
tial assistance to another person in the violation of a provi-
sion of this title, or of any rule, regulation, or order here-
under, shall be deemed to violate such provision to the
same extent as the person to whom such assistance is pro-
vided. No person shall be liable under this subsection
based on an omission or failure to act unless such omission
or failure constituted a breach of duty owed by such per-
son.’’.
SEC. 4. DESTRUCTION OF RECORDS; SEPARATION OF
FUNCTIONS.
(a) AUDIT REQUIREMENTS.—Section 10A of the Se-
curities Exchange Act of 1934 (15 U.S.C. 78j–1) is
amended—
(1) by redesignating subsections (e) and (f) as
subsections (g) and (h), respectively; and
(2) by inserting after subsection (d) the fol-
lowing new subsections:
‘‘(e) DESTRUCTION OF RECORDS.—
‘‘(1) MAINTENANCE OF RECORDS REQUIRED.—
Any accountant that conducts an audit of an issuer
pursuant to this title to which subsection (a) applies
shall maintain all documents (including electronic
documents) sent, received, or created in connection
with any audit, review, or other engagement for such
issuer for a period of four years from the end of the
fiscal period in which the engagement was con-
cluded.
‘‘(2) PENALTY.—In addition to any other sanc-
tions that may be available, any person who know-
ingly and willfully violates paragraph (1) shall be
subject to fine and imprisonment to the same extent
as a person violating section 1512(b) of title 18,
United States Code.
‘‘(f) CONSIDERATION OF SEPARATION OF AUDIT AND
NON-AUDIT FUNCTIONS.—
‘‘(1) CONSIDERATION
REQUIRED.—Any ac-
countant that conducts an audit of an issuer pursu-
ant to this title to which subsection (a) applies shall,
within 60 days after the date of enactment of the
Accountability for Accountants Act of 2002, initiate
a review of—
‘‘(A) whether that accountant should divest
itself of any interests in non-audit businesses in
light of the inherent potential conflicts of inter-
est in providing both audit and non-audit serv-
ices to an issuer; or
‘‘(B) whether the accountant should cease
providing non-audit services to those companies
whose financial statements it audits.
‘‘(2) REPORTS.—Each accountant to which
paragraph (1) applies shall report to the Commis-
sion within 12 months after such date of enactment
on whether such accountant has decided to either di-
vest its non-audit services, or to cease providing non-
audit services to audit clients. The Commission shall
submit a report to Congress on the reports received
under the preceding sentence.’’.
(b) PRESERVATION OF RECORDS DURING SHARE-
HOLDER LITIGATION.—
(1) SECURITIES ACT OF 1933.—Section 27(b)(2)
of the Securities Act of 1933 (15 U.S.C. 77z–
1(b)(2)) is amended by inserting ‘‘, and the issuer
of the securities that are the subject of such action,’’
after ‘‘in the complaint’’.
(2) SECURITIES EXCHANGE ACT OF 1934.—Sec-
tion 21D(b)(3)(C)(i) of the Securities Act of 1933
(15 U.S.C. 77z–1(b)(3)(C)(i)) is amended by insert-
ing ‘‘, and the issuer of the securities that are the
subject of such action,’’ after ‘‘in the complaint’’.
Æ