I
105TH CONGRESS
2D SESSION
H. R. 3165
To amend the Securities Exchange Act of 1934 to provide an opportunity
for judicial review concerning the adoption of accounting principles appli-
cable to issuers of federally-registered securities.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 5, 1998
Mr. BAKER introduced the following bill; which was referred to the Committee
on Commerce
A BILL
To amend the Securities Exchange Act of 1934 to provide
an opportunity for judicial review concerning the adop-
tion of accounting principles applicable to issuers of fed-
erally-registered securities.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Financial Accounting
Fairness Act of 1998’’.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The Financial Accounting Standards Board
was established in 1972 as a private sector body to
establish and improve financial accounting prin-
ciples.
(2) In 1973, the Securities and Exchange Com-
mission, which is statutorily empowered to prescribe
accounting principles to be used in financial state-
ments filed with the Securities and Exchange Com-
mission and otherwise used pursuant to the Federal
securities laws, established a presumption that fi-
nancial statements that do not comply with financial
accounting principles promulgated by the Financial
Accounting Standards Board would be misleading
and therefore in violation of those laws.
(3) Since 1973, financial accounting principles
established by the Financial Accounting Standards
Board accordingly have generally had the full force
and effect of Securities and Exchange Commission
regulations.
(4) Questions have been raised as to whether
under these circumstances persons aggrieved by a
Financial Accounting Standards Board pronounce-
ment of financial accounting principles would have
the right to judicial review thereof, and whether
such pronouncements must comply with statutory
and other requirements applicable to the promulga-
tion of Securities and Exchange Commission.
(5) Congress believes it appropriate to provide
that, under these circumstances, such promulgations
by the Financial Accounting Standards Board are
covered by statutory and other requirements relating
to the adoption of regulations by the Securities and
Exchange Commission, including provisions relating
to judicial review and provisions, among other
things, requiring that the Commission consider
whether proposed regulations would promote effi-
ciency, competition, and capital formation.
SEC. 3. AVAILABILITY OF JUDICIAL REVIEW.
Section 19 of the Securities Exchange Act of 1934
(15 U.S.C. 78s) is amended—
(1) by adding at the end of the heading of such
section the following: ‘‘; OVERSIGHT OF ACCOUNTING
PRINCIPLES’’; and
(2) by adding at the end the following new sub-
section:
‘‘(j) REVIEW
OF FINANCIAL ACCOUNTING PRIN-
CIPLES.—
‘‘(1) EXPRESS
APPROVAL
OF
ACCOUNTING
PRINCIPLES REQUIRED.—The Commission shall not
treat any proposed accounting principle of any ac-
the Commission the record of its proceedings in con-
nection with such principle. Such record shall in-
clude all written comments or statements filed with
the accounting standards board with respect to the
proposed accounting principle and all written com-
munications between the accounting standards board
and any person relating to the proposed accounting
principle. The Commission, in reviewing a proposed
accounting principle, shall keep in a public file and
make available for copying the record submitted by
the accounting standards board and all written
statements filed with the Commission with respect to
the proposed accounting principle and all written
communications between the Commission and any
person relating to the proposed accounting principle.
The Commission shall not be required to keep in a
public file or make available for copying any such
statement or communication that it may withhold
from the public in accordance with section 552 of
title 5, United States Code.
‘‘(7) JUDICIAL REVIEW AVAILABLE.—Any pro-
posed accounting principle that the Commission has
approved under paragraph (4) shall, for purposes of
section 25 of this title, be considered to be a rule of
the Commission promulgated pursuant to this sec-
tion.
‘‘(8) DEFINITIONS.—For purposes of this sub-
section:
‘‘(A) 
PROPOSED
ACCOUNTING
PRIN-
CIPLE.—
‘‘(i) ACCOUNTING
PRINCIPLE.—The
term ‘accounting principle’ means a state-
ment or interpretation of a standard or
concept of, or guidance with respect to, fi-
nancial accounting or reporting, but does
not include any technical bulletin, discus-
sion memorandum, invitation to comment,
special or research report, or response to
an inquiry or other request.
‘‘(ii) PROPOSED
ACCOUNTING
PRIN-
CIPLE.—The term ‘proposed accounting
principle’ means an accounting principle
that has been formally adopted or ratified
by the standard-setting body of an ac-
counting standards board.
‘‘(B) ACCOUNTING STANDARDS BOARD.—
The term ‘accounting standards board’ means
an accounting standards-setting organization
whose principles are, pursuant to rules or regu-
lations of the Commission, treated by Commis-
sion as generally accepted accounting principles
for purposes of any financial statement, report,
or other document required to be filed under
any of the securities laws.
‘‘(C) FEDERAL
BANKING
AGENCY.—The
term ‘Federal banking agency’ has the meaning
provided in section 3(z) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(z)).
‘‘(9) EFFECTIVE DATE.—The provisions of this
subsection shall apply with respect to any accounting
principle that is formally adopted or ratified by the
standard-setting body of an accounting standards
board on or after January 1, 1998.’’.
Æ