Title: Holding Foreign Companies Accountable Act
Policy area: Finance and Financial Sector

Summary:
Holding Foreign Companies Accountable Act
This bill requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the Public Company Accounting Oversight Board is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the board. Furthermore, if the board is unable to inspect the issuer's public accounting firm for three consecutive years, the issuer's securities are banned from trade on a national exchange or through other methods.
Foreign issuers of securities that use such a firm to prepare an audit report must disclose for each non-inspection year

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7000 Introduced in House (IH)]

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116th CONGRESS
  2d Session
                                H. R. 7000

 To amend the Sarbanes-Oxley Act of 2002 to require certain issuers to 
    disclose to the Securities and Exchange Commission information 
    regarding foreign jurisdictions that prevent the Public Company 
Accounting Oversight Board from performing inspections under that Act, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 22, 2020

 Mr. Sherman introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Sarbanes-Oxley Act of 2002 to require certain issuers to 
    disclose to the Securities and Exchange Commission information 
    regarding foreign jurisdictions that prevent the Public Company 
Accounting Oversight Board from performing inspections under that Act, 
                        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 ``Holding Foreign Companies 
Accountable Act''.

SEC. 2. DISCLOSURE REQUIREMENT.

    Section 104 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214) is 
amended by adding at the end the following:
    ``(i) Disclosure Regarding Foreign Jurisdictions That Prevent 
Inspections.--
            ``(1) Definitions.--In this subsection--
                    ``(A) the term `covered issuer' means an issuer 
                that is required to file reports under section 13 or 
                15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
                78m, 78o(d)); and
                    ``(B) the term `non-inspection year' means, with 
                respect to a covered issuer, a year--
                            ``(i) during which the Commission 
                        identifies the covered issuer under paragraph 
                        (2)(A) with respect to every report described 
                        in subparagraph (A) filed by the covered issuer 
                        during that year; and
                            ``(ii) that begins after the date of 
                        enactment of this subsection.
            ``(2) Disclosure to commission.--The Commission shall--
                    ``(A) identify each covered issuer that, with 
                respect to the preparation of the audit report on the 
                financial statement of the covered issuer that is 
                included in a report described in paragraph (1)(A) 
                filed by the covered issuer, retains a registered 
                public accounting firm that has a branch or office 
                that--
                            ``(i) is located in a foreign jurisdiction; 
                        and
                            ``(ii) the Board is unable to inspect or 
                        investigate completely because of a position 
                        taken by an authority in the foreign 
                        jurisdiction described in clause (i), as 
                        determined by the Board; and
                    ``(B) require each covered issuer identified under 
                subparagraph (A) to, in accordance with the rules 
                issued by the Commission under paragraph (4), submit to 
                the Commission documentation that establishes that the 
                covered issuer is not owned or controlled by a 
                governmental entity in the foreign jurisdiction 
                described in subparagraph (A)(i).
            ``(3) Trading prohibition after 3 years of non-
        inspections.--
                    ``(A) In general.--If the Commission determines 
                that a covered issuer has 3 consecutive non-inspection 
                years, the Commission shall prohibit the securities of 
                the covered issuer from being traded--
                            ``(i) on a national securities exchange; or
                            ``(ii) through any other method that is 
                        within the jurisdiction of the Commission to 
                        regulate, including through the method of 
                        trading that is commonly referred to as the 
                        `over-the-counter' trading of securities.
                    ``(B) Removal of initial prohibition.--If, after 
                the Commission imposes a prohibition on a covered 
                issuer under subparagraph (A), the covered issuer 
                certifies to the Commission that the covered issuer has 
                retained a registered public accounting firm that the 
                Board has inspected under this section to the 
                satisfaction of the Commission, the Commission shall 
                end that prohibition.
                    ``(C) Recurrence of non-inspection years.--If, 
                after the Commission ends a prohibition under 
                subparagraph (B) or (D) with respect to a covered 
                issuer, the Commission determines that the covered 
                issuer has a non-inspection year, the Commission shall 
                prohibit the securities of the covered issuer from 
                being traded--
                            ``(i) on a national securities exchange; or
                            ``(ii) through any other method that is 
                        within the jurisdiction of the Commission to 
                        regulate, including through the method of 
                        trading that is commonly referred to as the 
                        `over-the-counter' trading of securities.
                    ``(D) Removal of subsequent prohibition.--If, after 
                the end of the 5-year period beginning on the date on 
                which the Commission imposes a prohibition on a covered 
                issuer under subparagraph (C), the covered issuer 
                certifies to the Commission that the covered issuer 
                will retain a registered public accounting firm that 
                the Board is able to inspect under this section, the 
                Commission shall end that prohibition.
            ``(4) Rules.--Not later than 90 days after the date of 
        enactment of this subsection, the Commission shall issue rules 
        that establish the manner and form in which a covered issuer 
        shall make a submission required under paragraph (2)(B).''.

SEC. 3. ADDITIONAL DISCLOSURE.

    (a) Definitions.--In this section--
            (1) 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));
            (2) the term ``Commission'' means the Securities and 
        Exchange Commission;
            (3) 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;
            (4) the terms ``covered issuer'' and ``non-inspection 
        year'' have the meanings given the terms in subsection (i)(1) 
        of section 104 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
        7214), as added by section 2 of this Act; and
            (5) 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.
    (b) Requirement.--Each covered issuer that is a foreign issuer and 
for which, during a non-inspection year with respect to the covered 
issuer, a registered public accounting firm described in subsection 
(i)(2)(A) of section 104 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7214), as added by section 2 of this Act, has prepared an audit report 
shall disclose in each covered form filed by that issuer that covers 
such a non-inspection year--
            (1) that, during the period covered by the covered form, 
        such a registered public accounting firm has prepared an audit 
        report for the issuer;
            (2) 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;
            (3) whether governmental entities in the applicable foreign 
        jurisdiction with respect to that registered public accounting 
        firm have a controlling financial interest with respect to the 
        issuer;
            (4) the name of each official of the Chinese Communist 
        Party who is a member of the board of directors of--
                    (A) the issuer; or
                    (B) the operating entity with respect to the 
                issuer; and
            (5) whether the articles of incorporation of the issuer (or 
        equivalent organizing document) contains any charter of the 
        Chinese Communist Party, including the text of any such 
        charter.
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