Title: EQUITABLE Act
Policy area: Finance and Financial Sector

Summary:
Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges Act or the EQUITABLE Act
This bill generally restricts the use of a foreign public accounting firm by a foreign issuer of securities.
The bill requires certain disclosures from a foreign issuer of securities that uses, for its required audit report to the Securities and Exchange Commission (SEC), a foreign public accounting firm that is not subject to inspection by the Public Company Accounting Oversight Board.
If an issuer uses such a foreign public accounting firm, the issuer is generally prohibited from listing its securities on a national securities exchange. Specifically, an issuer that is not currently listed on an exchange and uses such a firm may not be listed. A currently-listed issuer will be delisted beginning in 2025 if the issuer uses such a firm for three consecutive years.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 1731 Introduced in Senate (IS)]

<DOC>






116th CONGRESS
  1st Session
                                S. 1731

 To amend the Sarbanes-Oxley Act of 2002 to require the Public Company 
   Accounting Oversight Board to maintain a list of certain foreign 
                    issuers, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              June 5, 2019

Mr. Rubio (for himself, Mr. Menendez, Mr. Cotton, and Mrs. Gillibrand) 
introduced the following bill; which was read twice and referred to the 
            Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To amend the Sarbanes-Oxley Act of 2002 to require the Public Company 
   Accounting Oversight Board to maintain a list of certain foreign 
                    issuers, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ensuring Quality Information and 
Transparency for Abroad-Based Listings on our Exchanges Act'' or the 
``EQUITABLE Act''.

SEC. 2. DEFINITIONS.

    In this Act--
            (1) the term ``applicable foreign issuer'' means a foreign 
        issuer--
                    (A) that is required to file a covered form; and
                    (B) for which, during the period covered by the 
                filing described in subparagraph (A), a covered foreign 
                public accounting firm has prepared an audit report for 
                the issuer;
            (2) the term ``audit report'' has the meaning given the 
        term in section 2(a) of the Sarbanes-Oxley Act of 2002 (15 
        U.S.C. 7201(a));
            (3) the term ``Board'' means the Public Company Accounting 
        Oversight Board;
            (4) the term ``Commission'' means the Securities and 
        Exchange Commission;
            (5) the term ``covered foreign public accounting firm'' 
        means a foreign public accounting firm that the Board is unable 
        to inspect or investigate under the Sarbanes-Oxley Act of 2002 
        (15 U.S.C. 7201 et seq.) because of a position taken by an 
        authority outside of the United States;
            (6) the term ``covered form''--
                    (A) means--
                            (i) the form described in section 249.310 
                        of title 17, Code of Federal Regulations, or 
                        any successor regulation; and
                            (ii) the form described in section 249.220f 
                        of title 17, Code of Federal Regulations, or 
                        any successor regulation; and
                    (B) includes a form that--
                            (i) is the equivalent of, or substantially 
                        similar to, the form described in clause (i) or 
                        (ii) of subparagraph (A); and
                            (ii) a foreign issuer files with the 
                        Commission under the Securities Exchange Act of 
                        1934 (15 U.S.C. 78a et seq.) or rules issued 
                        under that Act;
            (7) the term ``covered jurisdiction'' means the foreign 
        jurisdiction in which the position described in paragraph (5) 
        is taken with respect to a covered foreign public accounting 
        firm that prepares an audit report for an applicable foreign 
        issuer;
            (8) the term ``exchange'' has the meaning given the term in 
        section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78a(a));
            (9) the term ``foreign issuer'' has the meaning given the 
        term in section 240.3b-4 of title 17, Code of Federal 
        Regulations, or any successor regulation;
            (10) the term ``foreign public accounting firm'' has the 
        meaning given the term in section 106(g) of the Sarbanes-Oxley 
        Act of 2002 (15 U.S.C. 7216(g));
            (11) the term ``national securities exchange'' means an 
        exchange that is registered with the Commission under section 6 
        of the Securities Exchange Act of 1934 (15 U.S.C. 78f); and
            (12) the term ``public accounting firm'' has the meaning 
        given the term in section 2(a) of the Sarbanes-Oxley Act of 
        2002 (15 U.S.C. 7201(a)).

SEC. 3. DISCLOSURE.

    (a) List of Certain Foreign Issuers and Covered Foreign Public 
Accounting Firms.--
            (1) In general.--The Commission shall maintain a publicly 
        available list of--
                    (A) each foreign issuer, an audit report of which--
                            (i) is prepared by a foreign public 
                        accounting firm; and
                            (ii) the Board is not able to inspect or 
                        investigate because of a position taken by an 
                        authority that is outside of the United States;
                    (B) each covered foreign public accounting firm 
                that has prepared an audit report identified under 
                subparagraph (A); and
                    (C) the jurisdiction in which each covered foreign 
                public accounting firm identified under subparagraph 
                (B) is organized or operating.
            (2) Role of the board.--Not less frequently than annually, 
        the Board shall provide to the Commission the information that 
        is required for the Commission to carry out paragraph (1).
    (b) Annual Report Disclosure.--
            (1) Disclosure.--Each applicable foreign issuer shall 
        disclose in each covered form filed by the applicable foreign 
        issuer--
                    (A) that, during the period covered by covered 
                form, a covered foreign public accounting firm has 
                prepared an audit report for the issuer;
                    (B) the percentage of the shares of the issuer 
                owned by governmental entities in the foreign 
                jurisdiction in which the issuer is incorporated or 
                otherwise organized;
                    (C) whether governmental entities in a covered 
                jurisdiction with respect to any covered foreign public 
                accounting firm that has prepared an audit report for 
                the issuer during the period covered by the form have a 
                controlling financial interest with respect to the 
                issuer; and
                    (D) the name of any official of the Chinese 
                Communist Party who is a member of the board of 
                directors of the issuer or the operating entity with 
                respect to the issuer.
            (2) Update of rules.--Not later than 270 days after the 
        date of enactment of this Act, and after providing the 
        opportunity for public notice and comment, the Commission shall 
        make any amendments to the rules of the Commission that are 
        required as a result of the requirements of this subsection.
            (3) Effective date.--This subsection shall take effect on 
        the date on which the Commission completes the amendments 
        required under paragraph (2).
    (c) Disclosure by Brokers and Dealers.--Section 15(n) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o(n)) is amended--
            (1) in paragraph (1), by striking ``Commission may issue'' 
        and all that follows through the period at the end and 
        inserting the following: ``Commission--
                    ``(A) shall issue rules that require a broker and a 
                dealer to disclose, with respect to any advice, 
                analysis, or report of the broker or dealer to a retail 
                investor regarding the securities of a foreign issuer, 
                whether a covered foreign public accounting firm has 
                prepared an audit report for the foreign issuer; and
                    ``(B) in addition to the rules required under 
                subparagraph (A), may issue rules designating documents 
                or information that shall be provided by a broker or 
                dealer to a retail investor before the purchase of an 
                investment product or service by the retail 
                investor.''; and
            (2) by adding at the end the following:
            ``(4) Definitions.--In this subsection, the terms `audit 
        report', `covered foreign public accounting firm', and `foreign 
        issuer' have the meanings given the terms in section 2 of the 
        EQUITABLE Act.''.

SEC. 4. PROHIBITION AGAINST THE LISTING OF CERTAIN FIRMS ON NATIONAL 
              SECURITIES EXCHANGES.

    (a) In General.--Section 6(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78f(b)) is amended by adding at the end the following:
            ``(11)(A) The rules of the exchange prohibit the initial 
        listing, after the date of enactment of this paragraph, of any 
        security of an issuer for which a covered foreign public 
        accounting firm has prepared an audit report.
            ``(B) Nothing in subparagraph (A) may be construed to 
        prevent an exchange from listing a security on the exchange on 
        or after the date of enactment of this paragraph if that 
        security was listed on the exchange or a national securities 
        exchange before the date of enactment of this paragraph.
            ``(C) In this paragraph, the terms `audit report' and 
        `covered foreign public accounting firm' have the meanings 
        given the terms in section 2 of the EQUITABLE Act.
            ``(12)(A) The rules of the exchange prohibit the listing of 
        any security of a foreign issuer that, beginning in 2025, has 
        been identified under section 3(a)(1)(A) of the EQUITABLE Act 
        in 3 consecutive years.
            ``(B) Nothing in subparagraph (A) may be construed to 
        prevent an exchange from listing a security of a foreign issuer 
        described in that subparagraph beginning on the date on which 
        the issuer submits to the Commission an audit report for the 
        issuer that is prepared by a registered public accounting firm 
        that the Public Company Accounting Oversight Board has 
        inspected, or is able to inspect, under section 104 of the 
        Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214).
            ``(C) In this paragraph--
                    ``(i) the terms `audit report' and `registered 
                public accounting firm' have the meanings given the 
                terms in section 2(a) of the Sarbanes-Oxley Act of 2002 
                (15 U.S.C. 7201(a)); and
                    ``(ii) the terms `covered foreign public accounting 
                firm' and `foreign issuer' have the meanings given the 
                terms in section 2 of the EQUITABLE Act.''.
    (b) Rules.--
            (1) Proposals.--Not later than 90 days after the date of 
        enactment of this Act, each national securities exchange shall, 
        in accordance with section 19(b) of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78s(b)) and any rules prescribed by the 
        Commission under that section, file with the Commission any 
        proposed change to the rules of the exchange that is required 
        as a result of the amendments made by this section.
            (2) Adoption.--Not later than 1 year after the date of 
        enactment of this Act, each national securities exchange shall 
        have each proposed change described in paragraph (1) approved 
        by the Commission.
                                 <all>