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SEC. 18. STUDY OF INVESTMENT BANKS
(a) GAO STUDY.—The Comptroller General shall
conduct a study on whether investment banks and finan-
cial advisors in assisted public companies in manipulating
their earnings and obfuscating their true financial condi-
tion. The study should address the role of the investment
banks—
(1) in the collapse of the Enron Corporation,
including with respect to the design and implementa-
tion of derivatives transactions, transactions involv-
ing special purpose vehicles, and other financing ar-
rangements that may have had the effect of altering
the company’s reported financial statements in ways
that obscured the true financial picture of the com-
pany;
(2) in the failure of Global Crossing, including
with respect to transactions involving swaps of fiber
optic cable capacity, in designing transactions that
may have had the effect of altering the company’s
reported financial statements in ways that obscured
the true financial picture of the company; and
(3) generally, in creating and marketing trans-
actions which may have been designed solely to en-
able companies to manipulate revenue streams, ob-
tain loans, or move liabilities off balance sheets with-
out altering the economic and business risks faced
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by the companies or any other mechanism to obscure
a company’s financial picture.
(b) REPORT.—The General Accounting Office shall
report to the Congress within 180 days after the date of
enactment of this Act on the results of the study required
by this section. The report shall include a discussion of
regulatory or legislative steps that are recommended or
that may be necessary to address concerns identified in
the study.
SEC. 19. STUDY OF MODEL RULES FOR ATTORNEYS OF
ISSUERS.
(a) IN GENERAL.—The Comptroller General shall
conduct a study of the Model Rules of Professional Con-
duct promulgated by the American Bar Association and
rules of professional conduct applicable to attorneys estab-
lished by the Commission to determine—
(1) whether such rules provide sufficient guid-
ance to attorneys representing corporate clients who
are issuers required to file periodic disclosures under
section 13 or 15 of the Securities Exchange Act of
1934 (15 U.S.C. 78m, 78o), as to the ethical re-
sponsibilities of such attorneys to—
(A) warn clients of possible fraudulent or
illegal activities of such clients and possible con-
sequences of such activities;
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(B) disclose such fraudulent or illegal ac-
tivities to appropriate regulatory or law enforce-
ment authorities; and
(C) manage potential conflicts of interests
with clients; and
(2) whether such rules provide sufficient protec-
tion to corporate shareholders, especially with re-
gards to conflicts of interest between attorneys and
their corporate clients.
(b) REPORT REQUIRED.—The Comptroller General
shall report to the Committee on Financial Services of the
House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate on the results
of the study required by this section. Such report shall
include any recommendations of the General Accounting
Office with regards to—
(1) possible changes to the Model Rules and the
rules of professional conduct applicable to attorneys
established by the Commission to provide increased
protection to shareholders;
(2) whether restrictions should be imposed to
require that an attorney, having represented a cor-
poration or having been employed by a firm which
represented a corporation, may not be employed as
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general counsel to that corporation until a certain
period of time has expired; and
(3) regulatory or legislative steps that are rec-
ommended or that may be necessary to address con-
cerns identified in the study.
SEC. 20. ENFORCEMENT AUTHORITY.
For the purposes of enforcing and carrying out this
Act, the Commission shall have all of the authorities
granted to the Commission under the securities laws. Ac-
tions of the Commission under this Act, including actions
on rules or regulations, shall be subject to review in the
same manner as actions under the securities laws.
SEC. 21. EXCLUSION FOR INVESTMENT COMPANIES.
Sections 4, 6, 7, 8, 9, and 15 of this Act shall not
apply to an investment company registered under section
8 of the Investment Company Act of 1940 (15 U.S.C.
80a–8).
SEC. 22. DEFINITIONS.
As used in this Act:
(1) BLACKOUT PERIOD.—The term ‘‘blackout
period’’ with respect to the equity securities of any
issuer—
(A) means any period during which the
ability of at least fifty percent of the partici-
pants or beneficiaries under all applicable indi-
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vidual account plans maintained by the issuer
to purchase (or otherwise acquire) or sell (or
otherwise transfer) an interest in any equity of
such issuer is suspended by the issuer or a fidu-
ciary of the plan; but
(B) does not include—
(i) a period in which the employees of
an issuer may not allocate their interests
in the individual account plan due to an
express investment restriction—
(I) incorporated into the indi-
vidual account plan; and
(II) timely disclosed to employees
before joining the individual account
plan or as a subsequent amendment
to the plan; or
(ii) any suspension described in sub-
paragraph (A) that is imposed solely in
connection with persons becoming partici-
pants or beneficiaries, or ceasing to be par-
ticipants or beneficiaries, in an applicable
individual account plan by reason of a cor-
porate merger, acquisition, divestiture, or
similar transaction.
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(2) 
BOARDS
OF
ACCOUNTANCY
OF
THE
STATES.—The term ‘‘boards of accountancy of the
States’’ means any organization or association char-
tered or approved under the law of any State with
responsibility for the registration, supervision, or
regulation of accountants.
(3) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(4) INDIVIDUAL
ACCOUNT
PLAN.—The term
‘‘individual account plan’’ has the meaning provided
such term in section 3(34) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002(34)).
(5) ISSUER.—The term ‘‘issuer’’ shall have the
meaning set forth in section 2(a)(4) of the Securities
Act of 1933 (15 U.S.C. 77b(a)(4)).
(6) PERSON ASSOCIATED WITH AN ACCOUNT-
ANT.—The term ‘‘person associated with an ac-
countant’’ means any partner, officer, director, or
manager of such accountant (or any person occu-
pying a similar status or performing similar func-
tions), any person directly or indirectly controlling,
controlled by, or under common control with such
accountant, or any employee of such accountant who
performs a supervisory role in the auditing process.