IIB
107TH CONGRESS
2D SESSION
H. R. 3763
IN THE SENATE OF THE UNITED STATES
APRIL 25, 2002
Received; read twice and referred to the Committee on Banking, Housing, and
Urban Affairs
AN ACT
To protect investors by improving the accuracy and reliability
of corporate disclosures made pursuant to the securities
laws, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Corporate and Auditing Accountability, Responsibility,
and Transparency Act of 2002’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Auditor oversight.
Sec. 3. Improper influence on conduct of audits.
Sec. 4. Real-time disclosure of financial information.
Sec. 5. Insider trades during pension fund blackout periods prohibited.
Sec. 6. Improved transparency of corporate disclosures.
Sec. 7. Improvements in reporting on insider transactions and relationships.
Sec. 8. Codes of conduct.
Sec. 9. Enhanced oversight of periodic disclosures by issuers.
Sec. 10. Retention of records.
Sec. 11. Commission authority to bar persons from serving as officers or direc-
tors.
Sec. 12. Disgorging insiders profits from trades prior to correction of erroneous
financial statements.
Sec. 13. Securities and Exchange Commission authority to provide relief.
Sec. 14. Study of rules relating to analyst conflicts of interest.
Sec. 15. Review of corporate governance practices.
Sec. 16. Study of enforcement actions.
Sec. 17. Study of credit rating agencies.
Sec. 18. Study of investment banks and other financial institutions.
Sec. 19. Study of model rules for attorneys of issuers.
Sec. 20. Enforcement authority.
Sec. 21. Exclusion for investment companies.
Sec. 22. Definitions.
SEC. 2. AUDITOR OVERSIGHT.
(a) CERTIFIED FINANCIAL STATEMENT REQUIRE-
MENTS.—If a financial statement is required by the secu-
rities laws or any rule or regulation thereunder to be cer-
tified by an independent public or certified accountant, an
accountant shall not be considered to be qualified to cer-
tify such financial statement, and the Securities and Ex-
change Commission shall not accept a financial statement
certified by an accountant, unless such accountant—
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(1) is subject to a system of review by a public
regulatory organization that complies with the re-
quirements of this section and the rules prescribed
by the Commission under this section; and
(2) has not been determined in the most recent
review completed under such system to be not quali-
fied to certify such a statement.
(b) ESTABLISHMENT
OF PRO.—The Commission
shall by rule establish the criteria by which a public regu-
latory organization may be recognized for purposes of this
section. Such criteria shall include the following require-
ments:
(1)(A) The board of such organization shall be
comprised of five members—
(i) two of whom shall be persons who are
licensed to practice public accounting and who
have recent experience in auditing public com-
panies;
(ii) two of whom may be persons who are
licensed to practice public accounting, if such
person has not worked in the accounting profes-
sion for any of the last two years prior to the
date of such person’s appointment to the board;
and
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(iii) one of whom shall be a person who
has never been licensed to practice public ac-
counting.
(B) Each member of the board of such organi-
zation shall be a person who meets such standards
of financial literacy as are determined by the Com-
mission.
(2) Such organization is so organized and has
the capacity—
(A) to be able to carry out the purposes of
this section and to comply, and to enforce com-
pliance by accountants and persons associated
with accountants, with the provisions of this
Act, professional ethics and competency stand-
ards, and the rules of the organization;
(B) to perform a review of the work prod-
uct (including the quality thereof) of an ac-
countant or a person associated with an ac-
countant; and
(C) to perform a review of any potential
conflicts of interest between an accountant (or
a person associated with an accountant) and
the issuer, the issuer’s board of directors and
committees thereof, officers, and affiliates of
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such issuer, that may result in an impairment
of auditor independence.
(3) Such organization shall have the authority
to impose sanctions, which, if there is a finding of
knowing or intentional misconduct, may include a
determination that an accountant is not qualified to
certify a financial statement, or any categories of fi-
nancial statements, required by the securities laws,
or that a person associated with an accountant is
not qualified to participate in such certification, if,
after conducting a review and providing fair proce-
dures and an opportunity for a hearing, the organi-
zation finds that—
(A) such accountant or person associated
with an accountant has violated the standards
of independence, ethics, or competency in the
profession;
(B) such accountant or person associated
with an accountant has been found by the Com-
mission or a court of competent jurisdiction to
have violated the securities laws or a rule or
regulation thereunder (provided in both cases
that any applicable time period for appeal has
expired);
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(C) an audit conducted by such accountant
or any person associated with an accountant
has been materially affected by an impairment
of auditor independence;
(D) such accountant or person associated
with an accountant has performed both audit-
ing services and consulting services in violation
of the rules prescribed by the Commission pur-
suant to subsection (c); or
(E) such accountant or any person associ-
ated with an accountant has impeded, ob-
structed, or otherwise not cooperated in such
review.
(4) Any such organization shall disclose pub-
licly, and make available for public comment, pro-
posed procedures and methods for conducting such
reviews.
(5) Any such organization shall have in place
procedures to minimize and deter conflicts of inter-
est involving the public members of such organiza-
tion, and have in place procedures to resolve such
conflicts.
(6) Any such organization shall have in place
procedures for notifying the boards of accountancy
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of the States of the results of reviews and evidence
under paragraphs (2) and (3).
(7) Any such organization shall have in place
procedures for notifying the Commission of any find-
ings of such reviews, including any findings regard-
ing suspected violations of the securities laws.
(8) Any such organization shall consult with
boards of accountancy of the States.
(9) Any such organization shall have in place a
mechanism to allow the organization to operate on
a self-funded basis. Such funding mechanism shall
ensure that such organization is not solely depend-
ent upon members of the accounting profession for
such funding and operations.
(10) Any such organization shall have the au-
thority to request, in a manner established by the
Commission, that the Commission, by subpoena or
otherwise, compel the testimony of witnesses or the
production of any books, papers, correspondence,
memoranda, or other records relevant to any ac-
countant review proceeding or necessary or appro-
priate for the organization to carry out its purposes.
The Commission shall comply with any such request
from such an organization if the Commission deter-
mines that compliance with the request would assist
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the organization in its accountant review proceeding
or in carrying out its purposes, unless the Commis-
sion determines that compliance would not be in the
public interest. The issuance and enforcement of a
subpoena requested under this paragraph shall be
deemed to be made pursuant to, and shall be made
in accordance with, the provisions of subsections (b)
and (c) of section 21 of the Securities and Exchange
Act of 1934 (15 U.S.C. 78u(b)–(c)). For purposes
of taking evidence, the Commission in its discretion
may designate the Board, or any member thereof, as
officers pursuant to section 21(b) of such Act.
(c) PROHIBITION ON THE OFFER OF BOTH AUDIT
AND CONSULTING SERVICES.—
(1) 
MODIFICATION
OF
REGULATIONS
RE-
QUIRED.—The Commission shall revise its regula-
tions pertaining to auditor independence to require
that an accountant shall not be considered inde-
pendent with respect to an audit client if the ac-
countant provides to the client the following
nonaudit services, as such terms are defined in such
regulations as in effect on the date of enactment of
this Act, and subject to such conditions and exemp-
tions as the Commission shall prescribe:
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(A) financial information system design or
implementation; or
(B) internal audit services.
(2) REVIEW OF PROHIBITED NONAUDIT SERV-
ICES.—The Commission is authorized to review the
impact on the independence of auditors of the scope
of services provided by auditors to issuers in order
to determine whether the list of prohibited nonaudit
services under paragraph (1) shall be modified. In
conducting such review, the Commission shall con-
sider the impact of the provision of a service on an
auditor’s independence where provision of the service
creates a conflict of interest with the audit client.
(3) ADDITIONS BY RULE.—After conducting the
review required by paragraph (2) and at any other
time, the Commission may, by rule consistent with
the protection of investors and the public interest,
modify the list of prohibited nonaudit services under
paragraph (1).
(4) REPORT.—The Commission 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 its
conduct of any reviews as required by this section.
The report shall include a discussion of regulatory or
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legislative steps that are recommended or that may
be necessary to address concerns identified in the re-
views.
(5) CONFORMING REVISION.—The Commission
shall revise its regulations pertaining to accountant
fee disclosure items, as set forth in paragraphs
(e)(1) through (e)(3) of item 9 from Schedule 14A
(17 CFR 240.14a–101), in light of paragraph (1) of
this subsection and after making a determination as
to whether such disclosures are necessary.
(6) DEADLINE FOR RULEMAKING.—The Com-
mission shall—
(A) within 90 days after the date of enact-
ment of this Act, propose, and
(B) within 270 days after such date, pre-
scribe,
the revisions to its regulations required by this sub-
section.
(d) PRO ACCOUNTANT REVIEW PROCEEDINGS.—
(1) REVIEW PROCEEDING FINDINGS.—Any find-
ings made pursuant to an accountant review con-
ducted under this section that a financial statement
audited by such accountant and submitted to the
Commission may have been materially affected by an
impairment of auditor independence, or by a viola-
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tion of professional ethics and competency stand-
ards, shall be submitted to the Commission. The
Commission shall promptly notify an issuer of any
such finding that relates to the financial statements
of such issuer.
(2) 
CONFIDENTIAL
TREATMENT
OF
PRO-
CEEDINGS PENDING SEC REVIEW.—
(A) NO DISCLOSURE.—Except as otherwise
provided in this section, but notwithstanding
any other provision of law, neither the Commis-
sion, a recognized public regulatory organiza-
tion, nor any other person shall disclose any in-
formation concerning any accountant review or
proceeding and the findings therein.
(B) SPECIFIC WITHHOLDING NOT AUTHOR-
IZED.—Nothing in this subsection shall—
(i) authorize a recognized public regu-
latory organization to withhold information
from the Commission;
(ii) authorize such organization or the
Commission to withhold information con-
cerning an accountant review proceeding
from an accountant or person associated
with an accountant that is the subject of
such proceeding;
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(iii) authorize the Commission to
withhold information from Congress; or
(iv) prevent the Commission from
complying with a request for information
from any other Federal department or
agency requesting information for purposes
within the scope of its jurisdiction, or com-
plying with an order of a court of the
United States in an action brought by the
United States or the Commission.
(C) DURATION
OF
WITHHOLDING.—Nei-
ther the Commission nor the recognized public
regulatory organization shall disclose the results
of any such finding until the completion of any
review by the Commission under subsections (e)
and (f), or the conclusion of the 30-day period
for seeking review if no motion seeking review
is filed within such period.
(D) TREATMENT UNDER FOIA.—For pur-
poses of section 552 of title 5, United States
Code, this subsection shall be considered a stat-
ute described in subsection (b)(3)(B) of such
section 552.
(3) NONPRECLUSIVE
EFFECT
OF
PRO
FIND-
INGS.—A finding by a recognized public regulatory
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organization that an individual audit of an issuer
met or failed to meet any applicable standard with
respect to the quality of such audit shall not be con-
strued in any action arising out of the securities
laws as indicative of compliance or noncompliance
with the securities laws or with any standard of li-
ability arising thereunder.
(e) REVIEW OF SANCTIONS.—
(1) NOTICE.—If any recognized public regu-
latory organization—
(A) makes a finding with respect to or im-
poses any final disciplinary sanction on any ac-
countant;
(B) prohibits or limits any person in re-
spect to access to services offered by such orga-
nization; or
(C) makes a finding with respect to or im-
poses any final disciplinary sanction on any per-
son associated with an accountant or bars any
person from becoming associated with an ac-
countant,
the recognized public regulatory organization shall
promptly submit notice thereof with the Commission.
The notice shall be in such form and contain such
information as the Commission, by rule, may pre-
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scribe as necessary or appropriate in furtherance of
the purposes of this section.
(2) REVIEW BY COMMISSION.—Any action with
respect to which a recognized public regulatory orga-
nization is required by paragraph (1) of this sub-
section to submit notice shall be subject to review by
the Commission, on its own motion, or upon applica-
tion by any person aggrieved thereby filed within 30
days after the date such notice was filed with the
Commission and received by such aggrieved person,
or within such longer period as the Commission may
determine. Application to the Commission for review,
or the institution of review by the Commission on its
own motion, shall not operate as a stay of such ac-
tion unless the Commission otherwise orders, sum-
marily or after notice and opportunity for hearing on
the question of a stay (which hearing may consist
solely of the submission of affidavits or presentation
of oral arguments). The Commission shall establish
for appropriate cases an expedited procedure for
consideration and determination of the question of a
stay.
(f) CONDUCT OF COMMISSION REVIEW.—
(1) BASIS FOR ACTION.—In any proceeding to
review a final disciplinary sanction imposed by a rec-
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ognized public regulatory organization on an ac-
countant or a person associated with such account-
ant, after notice and opportunity for hearing (which
hearing may consist solely of consideration of the
record before the recognized public regulatory orga-
nization and opportunity for the presentation of sup-
porting reasons to affirm, modify, or set aside the
sanction)—
(A) if the Commission finds that such ac-
countant or person associated with an account-
ant has engaged in such acts or practices, or
has omitted such acts, as the recognized public
regulatory organization has found him to have
engaged in or omitted, that such acts or prac-
tices, or omissions to act, are in violation of
such provisions of this section, or of profes-
sional ethics and competency standards, and
that such provisions are, and were applied in a
manner, consistent with the purposes of this
section, the Commission, by order, shall so de-
clare and, as appropriate, affirm the sanction
imposed by the recognized public regulatory or-
ganization, modify the sanction in accordance
with paragraph (2) of this subsection, or re-
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mand to the recognized public regulatory orga-
nization for further proceedings; or
(B) if the Commission does not make any
such finding, it shall, by order, set aside the
sanction imposed by the recognized public regu-
latory organization and, if appropriate, remand
to the recognized public regulatory organization
for further proceedings.
(2) REDUCTION OF SANCTIONS.—If the Com-
mission, having due regard for the public interest
and the protection of investors, finds after a pro-
ceeding in accordance with paragraph (1) of this
subsection that a sanction imposed by a recognized
public regulatory organization upon an accountant
or person associated with an accountant imposes any
burden on competition not necessary or appropriate
in furtherance of the purposes of this Act or is ex-
cessive or oppressive, the Commission may cancel,
reduce, or require the remission of such sanction.
(g) REVIEW AND APPROVAL OF RULES.—
(1) SUBMISSION, 
PUBLICATION, 
AND
COM-
MENT.—Each recognized public regulatory organiza-
tion shall file with the Commission, in accordance
with such rules as the Commission may prescribe,
copies of any proposed rule or any proposed change
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in, addition to, or deletion from the rules of such
recognized public regulatory organization (herein-
after in this subsection collectively referred to as a
‘‘proposed rule change’’) accompanied by a concise
general statement of the basis and purpose of such
proposed rule change. The Commission shall, upon
the filing of any proposed rule change, publish notice
thereof together with the terms of substance of the
proposed rule change or a description of the subjects
and issues involved. The Commission shall give in-
terested persons an opportunity to submit written
data, views, and arguments concerning such pro-
posed rule change. No proposed rule change shall
take effect unless approved by the Commission or
otherwise permitted in accordance with the provi-
sions of this subsection.
(2) APPROVAL OR PROCEEDINGS.—Within 35
days of the date of publication of notice of the filing
of a proposed rule change in accordance with para-
graph (1) of this subsection, or within such longer
period as the Commission may designate up to 90
days of such date if it finds such longer period to
be appropriate and publishes its reasons for so find-
ing or as to which the recognized public regulatory
organization consents, the Commission shall—
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(A) by order approve such proposed rule
change; or
(B) institute proceedings to determine
whether the proposed rule change should be dis-
approved. Such proceedings shall include notice
of the grounds for disapproval under consider-
ation and opportunity for hearing and be con-
cluded within 180 days of the date of publica-
tion of notice of the filing of the proposed rule
change. At the conclusion of such proceedings
the Commission, by order, shall approve or dis-
approve such proposed rule change. The Com-
mission may extend the time for conclusion of
such proceedings for up to 60 days if it finds
good cause for such extension and publishes its
reasons for so finding or for such longer period
as to which the recognized public regulatory or-
ganization consents.
(3) BASIS FOR APPROVAL OR DISAPPROVAL.—
The Commission shall approve a proposed rule
change of a recognized public regulatory organiza-
tion if it finds that such proposed rule change is
consistent with the requirements of this Act and the
rules and regulations thereunder applicable to such
organization. The Commission shall disapprove a
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proposed rule change of a recognized public regu-
latory organization if it does not make such finding.
The Commission shall not approve any proposed rule
change prior to the 30th day after the date of publi-
cation of notice of the filing thereof, unless the Com-
mission finds good cause for so doing and publishes
its reasons for so finding.
(4) RULES EFFECTIVE UPON FILING.—
(A) Notwithstanding the provisions of
paragraph (2) of this subsection, a proposed
rule change may take effect upon filing with the
Commission if designated by the recognized
public regulatory organization as (i) consti-
tuting a stated policy, practice, or interpreta-
tion with respect to the meaning, administra-
tion, or enforcement of an existing rule of the
recognized public regulatory organization, (ii)
establishing or changing a due, fee, or other
charge imposed by the recognized public regu-
latory organization, or (iii) concerned solely
with the administration of the recognized public
regulatory organization or other matters which
the Commission, by rule, consistent with the
public interest and the purposes of this sub-
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section, may specify as outside the provisions of
such paragraph (2).
(B) Notwithstanding any other provision of
this subsection, a proposed rule change may be
put into effect summarily if it appears to the
Commission that such action is necessary for
the protection of investors, or otherwise in ac-
cordance with the purposes of this title. Any
proposed rule change so put into effect shall be
filed promptly thereafter in accordance with the
provisions of paragraph (1) of this subsection.
(C) Any proposed rule change of a recog-
nized public regulatory organization which has
taken effect pursuant to subparagraph (A) or
(B) of this paragraph may be enforced by such
organization to the extent it is not inconsistent
with the provisions of this Act, the securities
laws, the rules and regulations thereunder, and
applicable Federal and State law. At any time
within 60 days of the date of filing of such a
proposed rule change in accordance with the
provisions of paragraph (1) of this subsection,
the Commission summarily may abrogate the
change in the rules of the recognized public reg-
ulatory organization made thereby and require
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that the proposed rule change be refiled in ac-
cordance with the provisions of paragraph (1)
of this subsection and reviewed in accordance
with the provisions of paragraph (2) of this
subsection, if it appears to the Commission that
such action is necessary or appropriate in the
public interest, for the protection of investors,
or otherwise in furtherance of the purposes of
this Act. Commission action pursuant to the
preceding sentence shall not affect the validity
or force of the rule change during the period it
was in effect, shall not be subject to court re-
view, and shall not be deemed to be ‘‘final agen-
cy action’’ for purposes of section 704 of title
5, United States Code.
(h) COMMISSION ACTION TO CHANGE RULES.—The
Commission, by rule, may abrogate, add to, and delete
from (hereinafter in this subsection collectively referred to
as ‘‘amend’’) the rules of a recognized public regulatory
organization as the Commission deems necessary or ap-
propriate to insure the fair administration of the recog-
nized public regulatory organization, to conform its rules
to requirements of this Act, the securities laws, and the
rules and regulations thereunder applicable to such orga-
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the Commission’s conclusions as to any of such facts
which were disputed in the rulemaking.
(4)(A) Except as provided in paragraphs (1)
through (3) of this subsection, rulemaking under
this subsection shall be in accordance with the pro-
cedures specified in section 553 of title 5, United
States Code, for rulemaking not on the record.
(B) Nothing in this subsection shall be con-
strued to impair or limit the Commission’s power to
make, or to modify or alter the procedures the Com-
mission may follow in making, rules and regulations
pursuant to any other authority under the securities
laws.
(C) Any amendment to the rules of a recog-
nized public regulatory organization made by the
Commission pursuant to this subsection shall be con-
sidered for all purposes to be part of the rules of
such recognized public regulatory organization and
shall not be considered to be a rule of the Commis-
sion.
(i) COMMISSION OVERSIGHT OF THE PRO.—
(1) RECORDS
AND
EXAMINATIONS.—A public
regulatory organization shall make and keep for pre-
scribed periods such records, furnish such copies
thereof, and make and disseminate such reports as
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the Commission, by rule, prescribes as necessary or
appropriate in the public interest, for the protection
of investors, or otherwise in furtherance of the pur-
poses of this Act or the securities laws.
(2) ADDITIONAL DUTIES; SPECIAL REVIEWS.—
A public regulatory organization shall perform such
other duties or functions as the Commission, by rule
or order, determines are necessary or appropriate in
the public interest or for the protection of investors
and to carry out the purposes of this Act and the
securities laws, including conducting a special review
of a particular public accounting firm’s quality con-
trol system or a special review of a particular aspect
of some or all public accounting firms’ quality con-
trol systems.
(3) ANNUAL REPORT; PROPOSED BUDGET.—
(A) SUBMISSION OF ANNUAL REPORT AND
BUDGET.—A public regulatory organization
shall submit an annual report and its proposed
budget to the Commission for review and ap-
proval, by order, at such times and in such
form as the Commission shall prescribe.
(B) CONTENTS
OF
ANNUAL
REPORT.—
Each annual report required by subparagraph
(A) shall include—
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(i) a detailed description of the activi-
ties of the public regulatory organization;
(ii) the audited financial statements of
the public regulatory organization;
(iii) a detailed explanation of the fees
and charges imposed by the public regu-
latory 
organization 
under 
subsection
(b)(9); and
(iv) such other matters as the public
regulatory organization or the Commission
deems appropriate.
(C) TRANSMITTAL OF ANNUAL REPORT TO
CONGRESS.—The Commission shall transmit
each approved annual report received under
subparagraph (A) to the Committee on Finan-
cial Services of the United States House of
Representatives and the Committee on Bank-
ing, Housing, and Urban Affairs of the United
States Senate. At the same time it transmits a
public regulatory organization’s annual report
under this subparagraph, the Commission shall
include a written statement of its views of the
functioning and operations of the public regu-
latory organization.
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(D) 
PUBLIC
AVAILABILITY.—Following
transmittal of each approved annual report
under subparagraph (C), the Commission and
the public regulatory organization shall make
the approved annual report publicly available.
(4) DISAPPROVAL OF ELECTION OF PRO MEM-
BER.—The Commission is authorized, by order, if in
its opinion such action is 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, to disapprove the election of
any member of a public regulatory organization if
the Commission determines, after notice and oppor-
tunity for hearing, that the person elected is unfit
to serve on the public regulatory organization.
(j) CLARIFICATION OF APPLICATION OF PRO AU-
THORITY.—The authority granted to any such organiza-
tion in this section shall only apply to the actions of ac-
countants related to the certification of financial state-
ments required by securities laws and not other actions
or actions for other clients of the accounting firm or any
accountant that does not certify financial statements for
publicly traded companies.
(k) DEADLINE FOR RULEMAKING.—The Commission
shall—
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(1) within 90 days after the date of enactment
of this Act, propose, and
(2) within 270 days after such date, prescribe,
rules to implement this section.
(l) EFFECTIVE DATE; TRANSITION PROVISIONS.—
(1) EFFECTIVE DATE.—Except as provided in
paragraph (2), subsection (a) of this section shall be
effective with respect to any certified financial state-
ment for any fiscal year that ends more than one
year after the Commission recognizes a public regu-
latory organization pursuant to this section.
(2) DELAY IN ESTABLISHMENT OF BOARD.—If
the Commission has failed to recognize any public
regulatory organization pursuant to this section
within one year after the date of enactment of this
Act, the Commission shall perform the duties of
such organization with respect to any certified finan-
cial statement for any fiscal year that ends before
one year after any such board is recognized by the
Commission.
SEC. 3. IMPROPER INFLUENCE ON CONDUCT OF AUDITS.
(a) RULES TO PROHIBIT.—It shall be unlawful in
contravention of such rules or regulations as the Commis-
sion shall prescribe as necessary and appropriate in the
public interest or for the protection of investors for any
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officer, director, or affiliated person of an issuer of any
security registered under section 12 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78l) to take any action
to fraudulently influence, coerce, manipulate, or mislead
any independent public or certified accountant engaged in
the performance of an audit of the financial statements
of such issuer for the purpose of rendering such financial
statements materially misleading. In any civil proceeding,
the Commission shall have exclusive authority to enforce
this section and any rule or regulation hereunder.
(b) NO PREEMPTION OF OTHER LAW.—The provi-
sions of subsection (a) shall be in addition to, and shall
not supersede or preempt, any other provision of law or
any rule or regulation thereunder.
(c) DEADLINE FOR RULEMAKING.—The Commission
shall—
(1) within 90 days after the date of enactment
of this Act, propose, and
(2) within 270 days after such date, prescribe,
the rules or regulations required by this section.
SEC. 4. REAL-TIME DISCLOSURE OF FINANCIAL INFORMA-
TION.
(a) REAL-TIME ISSUER DISCLOSURES REQUIRED.—
(1) OBLIGATIONS.—Every issuer of a security
registered under section 12 of the Securities Ex-
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change Act of 1934 (15 U.S.C. 78l) shall file with
the Commission and disclose to the public, on a
rapid and essentially contemporaneous basis, such
information concerning the financial condition or op-
erations of such issuer as the Commission deter-
mines by rule is necessary in the public interest and
for the protection of investors. Such rule shall—
(A) specify the events or circumstances
giving rise to the obligation to disclose or up-
date a disclosure;
(B) establish requirements regarding the
rapidity and timeliness of such disclosure;
(C) identify the means whereby the disclo-
sure required shall be made, which shall ensure
the broad, rapid, and accurate dissemination of
the information to the public via electronic or
other communications device;
(D) identify the content of the information
to be disclosed; and
(E) without limiting the Commission’s gen-
eral exemptive authority, specify any exemp-
tions or exceptions from such requirements.
(2) ENFORCEMENT.—The Commission shall
have exclusive authority to enforce this section and
any rule or regulation hereunder in civil proceedings.
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(b) ELECTRONIC DISCLOSURE OF INSIDER TRANS-
ACTIONS.—
(1) DISCLOSURES OF TRADING.—The Commis-
sion shall, by rule, require—
(A) that a disclosure required by section
16 of the Securities Exchange Act of 1934 (15
U.S.C. 78p) of the sale of any securities of an
issuer, or any security futures product (as de-
fined in section 3(a)(56) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a)(56))) or
any security-based swap agreement (as defined
in section 206B of the Gramm-Leach-Bliley
Act) that is based in whole or in part on the
securities of such issuer, by an officer or direc-
tor of the issuer of those securities, or by a ben-
eficial owner of such securities, shall be made
available electronically to the Commission and
to the issuer by such officer, director, or bene-
ficial owner before the end of the next business
day after the day on which the transaction oc-
curs;
(B) that the information in such disclosure
be made available electronically to the public by
the Commission, to the extent permitted under
applicable law, upon receipt, but in no case
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later than the end of the next business day
after the day on which the disclosure is received
under subparagraph (A); and
(C) that, in any case in which the issuer
maintains a corporate website, such information
shall be made available by such issuer on that
website, before the end of the next business day
after the day on which the disclosure is received
by the Commission under subparagraph (A).
(2) TRANSACTIONS INCLUDED.—The rule pre-
scribed under paragraph (1) shall require the disclo-
sure of the following transactions:
(A) Direct or indirect sales or other trans-
fers of securities of the issuer (or any interest
therein) to the issuer or an affiliate of the
issuer.
(B) Loans or other extensions of credit ex-
tended to an officer, director, or other person
affiliated with the issuer on terms or conditions
not otherwise available to the public.
(3) OTHER FORMATS; FORMS.—In the rule pre-
scribed under paragraph (1), the Commission shall
provide that electronic filing and disclosure shall be
in lieu of any other format required for such disclo-
sures on the day before the date of enactment of this
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subsection. The Commission shall revise such forms
and schedules required to be filed with the Commis-
sion pursuant to paragraph (1) as necessary to fa-
cilitate such electronic filing and disclosure.
SEC. 5. INSIDER TRADES DURING PENSION FUND BLACK-
OUT PERIODS PROHIBITED.
(a) PROHIBITION.—It shall be unlawful for any per-
son who is directly or indirectly the beneficial owner of
more than 10 percent of any class of any equity security
(other than an exempted security) which is registered
under section 12 of the Securities Exchange Act of 1934
(15 U.S.C. 78l) or who is a director or an officer of the
issuer of such security, directly or indirectly, to purchase
(or otherwise acquire) or sell (or otherwise transfer) any
equity security of any issuer (other than an exempted se-
curity), during any blackout period with respect to such
equity security.
(b) REMEDY.—Any profit realized by such beneficial
owner, director, or officer from any purchase (or other ac-
quisition) or sale (or other transfer) in violation of this
section shall inure to and be recoverable by the issuer irre-
spective of any intention on the part of such beneficial
owner, director, or officer in entering into the transaction.
Suit to recover such profit may be instituted at law or
in equity in any court of competent jurisdiction by the
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issuer, or by the owner of any security of the issuer in
the name and in behalf of the issuer if the issuer shall
fail or refuse to bring such suit within 60 days after re-
quest or shall fail diligently to prosecute the same there-
after; but no such suit shall be brought more than 2 years
after the date such profit was realized. This subsection
shall not be construed to cover any transaction where such
beneficial owner was not such both at the time of the pur-
chase and sale, or the sale and purchase, of the security
or security-based swap (as defined in section 206B of the
Gramm-Leach-Bliley Act) involved, or any transaction or
transactions which the Commission by rules and regula-
tions may exempt as not comprehended within the pur-
poses of this subsection.
(c) RULEMAKING
PERMITTED.—The Commission
may issue rules to clarify the application of this sub-
section, to ensure adequate notice to all persons affected
by this subsection, and to prevent evasion thereof.
(d) DEFINITIONS.—For purposes of this section, the
terms ‘‘officer’’, ‘‘director’’, and ‘‘beneficial owner’’ have
the meanings provided such terms in rules or regulations
issued by the Securities and Exchange Commission under
section 16 of the Securities Exchange Act of 1934 (15
U.S.C. 78p).
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SEC. 6. IMPROVED TRANSPARENCY OF CORPORATE DIS-
CLOSURES.
(a) MODIFICATION OF REGULATIONS REQUIRED.—
The Commission shall revise its regulations under the se-
curities laws pertaining to the disclosures required in peri-
odic financial reports and registration statements to re-
quire such reports to include adequate and appropriate
disclosure of—
(1) the issuer’s off-balance sheet transactions
and relationships with unconsolidated entities or
other persons, to the extent they are not disclosed in
the financial statements and are reasonably likely to
materially affect the liquidity or the availability of,
or requirements for, capital resources, or the finan-
cial condition or results of operations of the issuer;
and
(2) loans extended to officers, directors, or
other persons affiliated with the issuer on terms or
conditions that are not otherwise available to the
public.
(b) DEADLINE FOR RULEMAKING.—The Commission
shall—
(1) within 90 days after the date of enactment
of this Act, propose, and
(2) within 270 days after such date, prescribe,
the revisions to its regulations required by subsection (a).
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(c) ANALYSIS REQUIRED.—
(1) TRANSPARENCY, COMPLETENESS, AND USE-
FULNESS OF FINANCIAL STATEMENTS.—The Com-
mission shall conduct an analysis of the extent to
which, consistent with the protection of investors
and the public interest, disclosure of additional or
reorganized information may be required to improve
the transparency, completeness, or usefulness of fi-
nancial statements and other corporate disclosures
filed under the securities laws.
(2) ALTERNATIVES
TO
BE
CONSIDERED.—In
conducting the analysis required by paragraph (1),
the Commission shall consider—
(A) requiring the identification of the key
accounting principles that are most important
to the issuer’s reported financial condition and
results of operation, and that require manage-
ment’s most difficult, subjective, or complex
judgments;
(B) requiring an explanation, where mate-
rial, of how different available accounting prin-
ciples applied, the judgments made in their ap-
plication, and the likelihood of materially dif-
ferent reported results if different assumptions
or conditions were to prevail;
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(C) in the case of any issuer engaged in
the business of trading non-exchange traded
contracts, requiring an explanation of such
trading activities when such activities require
the issuer to account for contracts at fair value,
but for which a lack of market price quotations
necessitates the use of fair value estimation
techniques;
(D) establishing requirements relating to
the presentation of information in clear and un-
derstandable format and language; and
(E) requiring such other disclosures, in-
cluded in the financial statements or in other
disclosure by the issuer, as would in the Com-
mission’s view improve the transparency of such
issuer’s financial statements and other required
corporate disclosures.
(3) RULES REQUIRED.—If the Commission, on
the basis of the analysis required by this subsection,
determines that it is necessary in the public interest
or for the protection of investors and would improve
the transparency of issuer financial statements, the
Commission may prescribe rules reflecting the re-
sults of such analysis and the considerations re-
quired by paragraph (2). In prescribing such rules,
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the Commission may seek to minimize the paper-
work and cost burden on the issuer consistent with
achieving the public interest and investor protection
purposes of such rules.
SEC. 7. IMPROVEMENTS IN REPORTING ON INSIDER
TRANSACTIONS AND RELATIONSHIPS.
(a) SPECIFIC OBJECTIVES.—The Commission shall
initiate a proceeding to propose changes in its rules and
regulations with respect to financial reporting to improve
the transparency and clarity of the information available
to investors and to require increased financial disclosure
with respect to the following:
(1) INSIDER
RELATIONSHIPS
AND
TRANS-
ACTIONS.—Relationships and transactions—
(A) between the issuer, affiliates of the
issuer, and officers, directors, or employees of
the issuer or such affiliates; and
(B) between officers, directors, employees,
or affiliates of the issuer and entities that are
not otherwise affiliated with the issuer,
to the extent such arrangement or transaction cre-
ates a conflict of interest for such persons. Such dis-
closure shall provide a description of such elements
of the transaction as are necessary for an under-
standing of the business purpose and economic sub-
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stance of such transaction (including contingencies).
The disclosure shall provide sufficient information to
determine the effect on the issuer’s financial state-
ments and describe compensation arrangements of
interested parties to such transactions.
(2) RELATIONSHIPS WITH PHILANTHROPIC OR-
GANIZATIONS.—Relationships between the registrant
or any executive officer of the registrant and any
not-for-profit organization on whose board a director
or immediate family member serves or of which a di-
rector or immediate family member serves as an offi-
cer or in a similar capacity. Relationships that shall
be disclosed include contributions to the organization
in excess of $10,000 made by the registrant or any
executive officer in the last five years and any other
activity undertaken by the registrant or any execu-
tive officer that provides a material benefit to the or-
ganization. Material benefit includes lobbying.
(3) INSIDER-CONTROLLED
AFFILIATES.—Rela-
tionships in which the registrant or any executive of-
ficer exercises significant control over an entity in
which a director or immediate family member owns
an equity interest or to which a director or imme-
diate family member has extended credit. Significant
control should be defined with reference to the con-
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tractual and governance arrangements between the
registrant or executive officer, as the case may be,
and the entity.
(4) JOINT OWNERSHIP.—Joint ownership by a
registrant or executive officer and a director or im-
mediate family member of any real or personal prop-
erty.
(5) PROVISION OF SERVICES BY RELATED PER-
SONS.—The provision of any professional services,
including legal, financial advisory or medical serv-
ices, by a director or immediate family member to
any executive officer of the registrant in the last five
years.
(b) DEADLINES.—The Commission shall complete
the rulemaking required by this section within 180 days
after the date of enactment of this Act.
SEC. 8. CODES OF CONDUCT.
Within 180 days after the date of enactment of this
Act, the Commission shall revise its regulations concerning
matters requiring prompt disclosure on Form 8K to re-
quire the immediate disclosure, by means of such Form
and by the Internet or other electronic means, by any
issuer of any change in, or waiver of, the code of ethics
of such issuer.
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SEC. 9. ENHANCED OVERSIGHT OF PERIODIC DISCLO-
SURES BY ISSUERS.
(a) REGULAR AND SYSTEMATIC REVIEW.—The Secu-
rities and Exchange Commission shall review disclosures
made by issuers pursuant to the Securities Exchange Act
of 1934 (including reports filed on form 10–K) on a basis
that is more regular and systematic than that in practice
on the date of enactment on this Act. Such review shall
include a review of an issuer’s financial statements.
(b) RISK RATING SYSTEM.—For purposes of the re-
views required by subsection (a), the Commission shall es-
tablish a risk rating system whereby issuers receive a risk
rating by the Commission, which shall be used to deter-
mine the frequency of such reviews. In designing such a
risk rating system the Commission shall consider, among
other factors the following:
(1) Emerging companies with disparities in
price to earning ratios.
(2) Issuers with the largest market capitaliza-
tion.
(3) Issuers whose operations significantly im-
pact any material sector of the economy.
(4) Systemic factors such as the effect on niche
markets or important subsectors of the economy.
(5) Issuers that experience significant volatility
in their stock price as compared to other issuers.
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(6) Any other factor the Commission may con-
sider relevant.
(c) MINIMUM REVIEW PERIOD.—In no event shall an
issuer be reviewed less than once every three years by the
Commission.
(d) PROHIBITION OF DISCLOSURE OF RISK RAT-
ING.—Notwithstanding any other provision of law, the
Commission shall not disclose the risk rating of any issuer
described in subsection (b).
SEC. 10. RETENTION OF RECORDS.
(a) DUTY TO RETAIN RECORDS.—Any independent
public or certified accountant who certifies a financial
statement as required by the securities laws or any rule
or regulation thereunder shall prepare and maintain for
a period of no less than 7 years, final audit work papers
and other information related to any accountant’s report
on such financial statements in sufficient detail to support
the opinion or assertion reached in such accountant’s re-
port. The Commission may prescribe rules specifying the
application and requirements of this section.
(b) ACCOUNTANT’S REPORT.—For purposes of sub-
section (a), the term ‘‘accountant’s report’’ means a docu-
ment in which an accountant identifies a financial state-
ment and sets forth his or her opinion regarding such fi-
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nancial statement or an assertion that he or she cannot
express an opinion.
SEC. 11. COMMISSION AUTHORITY TO BAR PERSONS FROM
SERVING AS OFFICERS OR DIRECTORS.
(a) COMMISSION AUTHORITY TO PROHIBIT PERSONS
FROM SERVING AS OFFICERS OR DIRECTORS.—Notwith-
standing any other provision of the securities laws, in any
cease-and-desist proceeding under section 8A(a) of the Se-
curities Act of 1933 or section 21C(a) of the Securities
and Exchange Act of 1934, the Commission may issue an
order to prohibit, conditionally or unconditionally, perma-
nently or for such period of time as it shall determine,
any person who has violated section 17(a)(1) of the Secu-
rities Act of 1933 or section 10(b) of the Securities Ex-
change Act of 1934 (or any rule or regulation thereunder)
from acting as an officer or director of any issuer that
has a class of securities registered pursuant to section 12
of the Securities Exchange Act of 1934 or that is required
to file reports pursuant to section 15(d) of such Act if
the person’s conduct demonstrates substantial unfitness to
serve as an officer or director of any such issuer.
(b) FINDING
OF
SUBSTANTIAL
UNFITNESS.—In
making any determination that a person’s conduct dem-
onstrates substantial unfitness to serve as an officer or
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director of any such issuer, the Commission shall
consider—
(1) the severity of the persons conduct giving
rise to the violation, and the persons role or position
when he engaged in the violation;
(2) the person’s degree of scienter;
(3) the person’s economic gain as a result of
the violation; and
(4) the likelihood that the conduct giving rise to
the violation, or similar conduct as defined in sub-
section (a), may recur if the person is not so prohib-
ited.
(c) AUTOMATIC STAY PENDING APPEAL.—The en-
forcement of any Commission order pursuant to sub-
section (a) shall be stayed—
(1) for a period of at least 60 days after the
entry of any such order or decision; and
(2) upon the filing of a timely application for
judicial review of such order or decision, pending the
entry of a final order resolving the application for
judicial review.
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SEC. 12. DISGORGING INSIDERS PROFITS FROM TRADES
PRIOR TO CORRECTION OF ERRONEOUS FI-
NANCIAL STATEMENTS.
(a) ANALYSIS REQUIRED.—The Commission shall
conduct an analysis of whether, and under what condi-
tions, any officer or director of an issuer should be re-
quired to disgorge profits gained, or losses avoided, in the
sale of the securities of such issuer during the six month
period immediately preceding the filing of a restated finan-
cial statement on the part of such issuer.
(b) DISGORGEMENT RULES AUTHORIZED.—If the
Commission determines that imposing the requirement de-
scribed in subsection (a) is necessary or appropriate in the
public interest or for the protection investors, and would
not unduly impair the operations of issuers or the orderly
operation of the securities markets, the Commission shall
prescribe a rule requiring the disgorgement of all profits
gained or losses avoided in the sale of the securities of
the issuer by any officer or director thereof. Such rule
shall—
(1) describe the conditions under which any of-
ficer or director shall be required to disgorge profits,
including what constitutes a restatement for pur-
poses of operation of the rule;
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(2) establish exceptions and exemptions from
such rule as necessary to carry out the purposes of
this section;
(3) identify the scienter requirement that
should be used in order to determine to impose the
requirement to disgorge; and
(4) specify that the enforcement of such rule
shall lie solely with the Commission, and that any
profits so disgorged shall inure to the issuer.
(c) NO PREEMPTION OF OTHER LAW.—Unless other-
wise specified by the Commission, in the case of any rule
promulgated pursuant to subsection (b), such rule shall
be in addition to, and shall not supersede or preempt, the
Commission’s authority to seek disgorgement under any
other provision of law.
SEC. 13. SECURITIES AND EXCHANGE COMMISSION AU-
THORITY TO PROVIDE RELIEF.
(a) PROCEEDS
OF ENRON
AND ANDERSEN EN-
FORCEMENT ACTIONS.—If in any administrative or judi-
cial proceeding brought by the Securities and Exchange
Commission against—
(1) the Enron Corporation, any subsidiary or
affiliate of such Corporation, or any officer, director,
or principal shareholder of such Corporation, sub-
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sidiary, or affiliate for any violation of the securities
laws; or
(2) Arthur Andersen L.L.C., any subsidiary or
affiliate of Arthur Andersen L.L.C., or any general
or limited partner of Arthur Andersen L.L.C., or
such subsidiary or affiliate, for any violation of the
securities laws with respect to any services per-
formed for or in relation to the Enron Corporation,
any subsidiary or affiliate of such Corporation, or
any officer, director, or principal shareholder of such
Corporation, subsidiary, or affiliate;
the Commission obtains an order providing for an account-
ing and disgorgement of funds, such disgorgement fund
(including any addition to such fund required or permitted
under this section) shall be allocated in accordance with
the requirements of this section.
(b) PRIORITY FOR FORMER ENRON EMPLOYEES.—
The Commission shall, by order, establish an allocation
system for the disgorgement fund. Such system shall pro-
vide that, in allocating the disgorgement fund amount the
victims of the securities laws violations described in sub-
section (a), the first priority shall be given to individuals
who were employed by the Enron Corporation, or a sub-
sidiary or affiliate of such Corporation, and who were par-
ticipants in an individual account plan established by such
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Corporation, subsidiary, or affiliate. Such allocations
among such individuals shall be in proportion to the extent
to which the nonforfeitable accrued benefit of each such
individual under the plan was invested in the securities
of such Corporation, subsidiary, or affiliate.
(c) ADDITION OF CIVIL PENALTIES.—If, in any pro-
ceeding described in subsection (a), the Commission as-
sesses and collects any civil penalty, the Commission shall,
notwithstanding section 21(d)(3)(C)(i) or 21A(d)(1) of the
Securities Exchange Act of 1934, or any other provision
of the securities laws, be payable to the disgorgement
fund.
(d) ACCEPTANCE OF ADDITIONAL DONATIONS.—The
Commission is authorized to accept, hold, administer, and
utilize gifts, bequests and devises of property, both real
and personal, to the United States for the disgorgement
fund. Gifts, bequests, and devises of money and proceeds
from sales of other property received as gifts, bequests,
or devises shall be deposited in the disgorgement fund and
shall be available for allocation in accordance with sub-
section (b).
(e) DEFINITIONS.—As used in this section:
(1) 
DISGORGEMENT
FUND.—The 
term
‘‘disgorgement fund’’ means a disgorgement fund es-
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tablished in any administrative or judicial proceeding
described in subsection (a).
(2) SUBSIDIARY
OR
AFFILIATE.—The term
‘‘subsidiary or affiliate’’ when used in relation to a
person means any entity that controls, is controlled
by, or is under common control with such person.
(3) OFFICER, DIRECTOR, OR PRINCIPAL SHARE-
HOLDER.—The term ‘‘officer, director, or principal
shareholder’’ when used in relation to the Enron
Corporation, or any subsidiary or affiliate of such
Corporation, means any person that is subject to the
requirements of section 16 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78p) in relation to
the Enron Corporation, or any subsidiary or affiliate
of such Corporation.
(4) NONFORFEITABLE; ACCRUED BENEFIT; IN-
DIVIDUAL ACCOUNT PLAN.—The terms ‘‘nonforfeit-
able’’, ‘‘accrued benefit’’, and ‘‘individual account
plan’’ have the meanings provided such terms, re-
spectively, in paragraphs (19), (23), and (34) of sec-
tion 3 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1002(19), (23), (34)).
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SEC. 14. STUDY OF RULES RELATING TO ANALYST CON-
FLICTS OF INTEREST.
(a) STUDY AND REVIEW REQUIRED.—The Commis-
sion shall conduct a study and review of any final rules
by any self-regulatory organization registered with the
Commission related to matters involving equity research
analysts conflicts of interest. Such study and report shall
include a review of the effectiveness of such final rules
in addressing matters relating to the objectivity and integ-
rity of equity research analyst reports and recommenda-
tions.
(b) REPORT REQUIRED.—The Commission shall sub-
mit a 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
such study and review no later than 180 days after any
such final rules by any self-regulatory organization reg-
istered with the Commission are delivered to the Commis-
sion. Such report shall include recommendations to the
Congress, including any recommendations for additional
self-regulatory organization rulemaking regarding matters
involving equity research analysts. The Commission shall
annually submit an update on such review.
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SEC. 15. REVIEW OF CORPORATE GOVERNANCE PRAC-
TICES.
(a) STUDY OF CORPORATE PRACTICES.—The Com-
mission shall conduct a study and review of current cor-
porate governance standards and practices to determine
whether such standards and practices are serving the best
interests of shareholders. Such study and review shall in-
clude an analysis of—
(1) whether current standards and practices
promote full disclosure of relevant information to
shareholders;
(2) whether corporate codes of ethics are ade-
quate to protect shareholders, and to what extent
deviations from such codes are tolerated;
(3) to what extent conflicts of interests are ag-
gressively reviewed, and whether adequate means for
redressing such conflicts exist;
(4) to what extent sufficient legal protections
exist or should be adopted to ensure that any man-
ager who attempts to manipulate or unduly influence
an audit will be subject to appropriate sanction and
liability, including liability to investors or share-
holders pursuing a private cause of action for such
manipulation or undue influence;
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(5) whether rules, standards, and practices re-
lating to determining whether independent directors
are in fact independent are adequate;
(6) whether rules, standards, and practices re-
lating to the independence of directors serving on
audit committees are uniformly applied and ade-
quate to protect investor interests;
(7) whether the duties and responsibilities of
audit committees should be established by the Com-
mission; and
(8) what further or additional practices or
standards might best protect investors and promote
the interests of shareholders.
(b) PARTICIPATION
OF STATE REGULATORS.—In
conducting the study required under subsection (a), the
Commission shall seek the views of the securities and cor-
porate regulators of the various States.
(c) REPORT REQUIRED.—The Commission shall sub-
mit a report on the analysis required under subsection (a)
as a part of the Commission’s next annual report sub-
mitted after the date of enactment of this Act.
SEC. 16. STUDY OF ENFORCEMENT ACTIONS.
(a) STUDY REQUIRED.—The Commission shall re-
view and analyze all enforcement actions by the Commis-
sion involving violations of reporting requirements im-
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posed under the securities laws, and restatements of finan-
cial statements, over the last five years to identify areas
of reporting that are most susceptible to fraud, inappro-
priate manipulation, or inappropriate earnings manage-
ment, such as revenue recognition and the accounting
treatment of off-balance sheet special purpose entities.
(b) REPORT REQUIRED.—The Commission shall re-
port its findings to the Committee on Financial Services
of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate with-
in 180 days of the date of enactment of this Act and shall
use such findings to revise its rules and regulations, as
necessary. The report shall include a discussion of regu-
latory or legislative steps that are recommended or that
may be necessary to address concerns identified in the
study.
SEC. 17. STUDY OF CREDIT RATING AGENCIES.
(a) STUDY REQUIRED.—The Commission shall con-
duct a study of the role and function of credit rating agen-
cies in the operation of the securities market. Such study
shall examine—
(1) the role of the credit rating agencies in the
evaluation of issuers of securities;
(2) the importance of that role to investors and
the functioning of the securities markets;
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(3) any impediments to the accurate appraisal
by credit rating agencies of the financial resources
and risks of issuers of securities;
(4) any measures which may be required to im-
prove the dissemination of information concerning
such resources and risks when credit rating agencies
announce credit ratings;
(5) any barriers to entry into the business of
acting as a credit rating agency, and any measures
needed to remove such barriers; and
(6) any conflicts of interest in the operation of
credit rating agencies and measures to prevent such
conflicts or ameliorate the consequences of such con-
flicts.
(b) REPORT REQUIRED.—The Commission shall sub-
mit a report on the analysis required by subsection (a)
to the President, the Committee on Financial Services of
the House of Representatives, and the Committee on
Banking, Housing, and Urban Affairs of the Senate with-
in 180 days after the date of enactment of this Act. 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.