Corporate Accountability: Sarbanes-Oxley Act of 2002: (P.L. 107-204)
Released: 2002-08-27T00:00:00

Title I: Public Company Accounting Oversight Board

Section 101 establishes the Public Company Accounting Oversight Board (Board), a new,independent regulatory body, to oversee the auditing of issuers (public companies which are subjectto the federal securities laws). The Board's oversight of auditors is for the purpose of protecting theinterests of investors.

The Board shall not be an agency or establishment of the United States Government and shallbe a nonprofit corporation subject to the District of Columbia Nonprofit Corporation Act. Noemployee shall be deemed an officer, employee, or agent of the federal government.

The Board is subject to the oversight of the Securities and Exchange Commission, andsubject to this oversight the Board shall register public accounting firms which prepare audit reportsfor issuers subject to SEC registration, establish standards concerning the preparation of auditreports, conduct inspections of registered public accounting firms, conduct investigations anddisciplinary proceedings where justified upon registered public accounting firms, perform otherduties as determined by the SEC, enforce compliance with the Act, and set the budget and managethe operations of the Board and its staff.

The Board shall have five members, who shall be prominent individuals of integrity with ademonstrated commitment to the interests of investors and the public. They must understand thefinancial disclosures required of issuers under the securities laws and the obligations of accountantsconcerning the preparation and issuing of audit reports concerning these disclosures.

Only two members of the Board shall be or have been certified public accountants. If oneof those persons is the chairperson, that person may not have been a practicing certified publicaccountant for at least five years before appointment to the Board. Each Board member must serveon a full-time basis and may not have other employment while serving on the Board. No Boardmember can share in the profits of or receive payments from a public accounting firm, except forfixed continuing payments under standard retirement arrangements, subject to conditions imposedby the SEC.

Not later than ninety days after the Act's enactment, the SEC, after consulting with theChairman of the Board of Governors of the Federal Reserve System and the Secretary of theTreasury, shall appoint the chairperson of the Board and other initial members and shall designateeach person's term of service.

The term of service of each Board member is five years, except that the terms of office of theinitial Board members shall expire in annual increments. Any Board member appointed to fill avacancy occurring before the expiration of the term of the predecessor shall be appointed only forthe remainder of that term.

No person may be a member or chairperson of the Board for more than two terms, whetheror not consecutive. A member of the Board may be removed by the SEC for good cause.

The Board may issue rules concerning its operation and administration and other matters,subject to the approval of the SEC.

The Board must submit an annual report to the SEC; the SEC shall transmit a copy of thatreport to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committeeon Financial Services.

Section 102 requires that, beginning 180 days after the Commission determines that theBoard can fulfill its duties, it shall be unlawful for any person not a registered public accounting firmto prepare or issue or participate in the preparation or issuing of any audit report concerning anyissuer.

Each accounting firm must submit as part of its application for registration the names of allissuers for which it prepared or issued audit reports during the preceding calendar year; the annualfees received from each issuer for audit services, other accounting services, and non-audit services;other current financial information as requested by the Board; a statement of the firm's qualitycontrol practices; a list of all accountants associated with the firm who help to prepare audit reports;information concerning civil, criminal, or administrative actions or disciplinary proceedings pendingagainst the firm or any person associated with the firm in connection with any audit report; copiesof any disclosures filed by an issuer with the Commission concerning accounting disagreements; andany other specified information.

The Board shall approve a completed application for registration not later than 45 days afterthe date of receipt unless the Board issues a notice of disapproval or requests more information. Each registered public accounting firm shall submit an annual report to the Board and may berequired to update reports more frequently. Registration applications and annual reports shall bemade available for public inspection.

The Board shall assess and collect a registration fee and an annual fee from each registeredpublic accounting firm to cover the costs of processing and reviewing.

Section 103 requires the Board to establish by rule such quality control standards to be usedby registered public accounting firms in the preparation and issuing of audit reports, as required bythe Act or the rules of the Commission or as necessary or appropriate in the public interest or for theprotection of investors. The Board may consult with professional groups of accountants or advisorygroups.

The Board's rules shall require that each registered public accounting firm must keep workpapers for at least seven years, provide a concurring or second partner review of the audit report, anddescribe in each audit report the internal control structure and procedures of the issuer.

The Board shall cooperate with professional groups of accountants and advisory groups inthe examination of the need for changes in accounting standards.

Section 104 requires the Board to conduct a continuing program of inspections to assess thedegree of compliance of each registered public accounting firm. Inspections shall be conductedannually for each registered public accounting firm providing audit reports for more than 100 issuersand at least once every three years for each firm providing audit reports for 100 or fewer issuers.

Section 105 requires the Board to issue rules concerning fair procedures for the investigationand disciplining of registered public accounting firms and associated persons of the firms. TheBoard may conduct an investigation of any act or practice by a registered public accounting firmwhich may be a violation of the Act, the Board's rules, or the securities laws concerning preparationand issuing of audit reports and liabilities of accountants.

If a registered public accounting firm or person associated with the firm refuses to cooperatewith the investigation, the Board may impose such sanctions as suspending or revoking theregistration of the public accounting firm.

The Board may refer an investigation to the Commission, any other federal functionalregulator, the Attorney General of the United States, the attorney general of one or more states, andthe appropriate state regulatory authority.

For the most part information received by the Board concerning an investigation shall beprivileged and confidential in any proceeding in federal court, state court, or administrative agencyuntil presented in connection with a public proceeding.

If the Board finds that a registered public accounting firm has violated the Act, the rules ofthe Board, or the securities laws concerning audit reports and accountants, it may impose appropriatesanctions, including temporary suspension or permanent revocation of registration; a civil penaltyfor each violation in an amount not more than $100,000 for a natural person or $2,000,000 for anyother person; if in a case involving intentional or other knowing conduct, a fine not more than$750,000 for a natural person or $15,000,000 for any other person; censure; or any other appropriatesanction. Such sanctions as registration suspension and revocation and the larger monetary penaltiesshall apply only to intentional or knowing conduct, including reckless conduct, or in repeatedinstances of negligent conduct.

Section 106 states that any foreign accounting firm which prepares or furnishes an auditreport concerning any issuer is subject to the Act and the rules of the Board and the SEC issuedunder the Act to the same extent as a United States public accounting firm. Audit workpapers of theforeign accounting firm shall be produced if a United States public accounting firm relies upon theopinion of a foreign accounting firm in auditing an issuer.

The Commission and the Board may exempt any foreign public accounting firm from anyprovision of the Act or from rules of the Board or the Commission in the public interest or for theprotection of investors.

Section 107 provides that the Commission shall have oversight and enforcement authorityover the Board. No rule of the Board shall become effective without prior approval by theCommission. The Board is to be treated as a registered securities association for purposes ofapproval of its rules by the Commission. The Commission may modify a sanction imposed by theBoard upon a registered public accounting firm if it finds that the sanction is not necessary orappropriate or is excessive, oppressive, or inadequate.

Section 108 allows the Commission to recognize as "generally accepted" for purposes of thesecurities laws any accounting principles established by a standard setting body that is a privateentity, has a board of trustees the majority of whom are not and have not been for two yearsassociated with a registered public accounting firm, is funded as required, has adopted proceduresto ensure prompt changes to accounting principles necessary to reflect changing business practices,and considers the need to keep standards current. This standard setting body must have the capacityto assist the Commission. The standard setting body must submit an annual report to theCommission and the public.

The SEC shall conduct a study on adoption by the United States financial reporting systemof a principles-based accounting system to replace the rules-based accounting system.

Section 109 concerns funding of the Board and the standard setting body, known as theFinancial Accounting Standards Board. The Board and the standard setting body shall establish anannual budget, which is subject to approval by the SEC.

The budget of the Board shall be payable from annual accounting support fees assessed uponpublicly traded companies.

Title II: Auditor Independence

Section 201 prohibits a registered public accounting firm which performs an audit for anyissuer to provide to that issuer any non-audit service, such as bookkeeping, financial informationsystems design, actuarial services, management functions, investment banking service, and legalservices. Accounting firms may provide certain other non-audit services, including tax services, foran audit client if the activity is approved by the audit committee of the issuer.

Section 202 requires that all auditing services and non-audit services provided to an issuerby the auditor of the issuer be preapproved by the audit committee of the issuer (or, if no suchcommittee exists, the entire board of directors of the issuer). Approval by an audit committee of anon-audit service to be approved by the auditor shall be disclosed to investors in periodic reports.

Section 203 prohibits a registered public accounting firm from providing audit services toan issuer if the lead audit partner has performed audit services for the issuer in each of the fiveprevious fiscal years.

Section 204 requires each registered public accounting firm performing an audit for an issuerto report to the audit committee all critical accounting policies and practices, all alternativetreatments of financial information, and other material written communications.

Section 206 makes it unlawful for a registered public accounting firm to perform any auditservice if a chief executive officer, controller, chief financial officer, or chief accounting officer wasemployed by that independent registered public accounting firm and participated in any capacity inthe audit of that issuer during the one year period preceding the date of the initiation of the audit.

Title III: Corporate Responsibility

Section 301 requires each member of the audit committee of the issuer to be a member of theboard of directors of the issuer and to be independent otherwise. In order to be consideredindependent, a member of an audit committee may not accept any consulting, advisory or othercompensatory fee from the issuer or be an affiliated person of the issuer or any subsidiary.

Each audit committee must establish procedures for the treatment of complaints concerningaccounting or auditing matters and anonymous submissions by employees of the issuer concerningquestionable accounting or auditing matters.

Section 302 directs the Commission to issue a rule requiring for each company filing periodicreports under the Securities Exchange Act of 1934 that the principal executive officer and theprincipal financial officer certify in each annual or quarterly report that the signing officer hasreviewed the report and that, based on the officer's knowledge, the report does not contain untruestatements and does not omit statements resulting in a misleading report and that the financialstatements fairly represent the financial condition of the company. The signing officers areresponsible for establishing and maintaining internal controls. The signing officers must discloseto the issuer's auditors and to the audit committee significant deficiencies in the internal controls andany fraud which involves management or employees who have a significant role in the issuer'sinternal controls.

The requirements of this provision shall not be diminished if an issuer reincorporates ortransfers domicile or offices from inside the United States to a foreign country.

Section 303 declares unlawful any officer's or director's taking any action fraudulently toinfluence, coerce, manipulate, or mislead any independent public or certified accountant engaged inauditing financial statements for the purpose of making those financial statements materiallymisleading.

Section 304 provides that, if an issuer is required to prepare an accounting restatementbecause of material noncompliance of the issuer as a result of misconduct, the chief executive officerand the chief financial officer shall reimburse the issuer for any bonus received during the during theprevious twelve month period and any profits from the sale of securities of the issuer during thattwelve month period.

Section 305 gives the SEC the authority to bar a person from serving as an officer or directorif that person committed a securities law violation and his conduct demonstrated unfitness to serveas an officer or director.

The Commission may also seek in federal court any equitable relief appropriate or necessaryfor the benefit of investors.

Section 306 prohibits directors or executive officers from engaging in transactions involvingany equity security of the issuer during any blackout period if the director or officer acquires theequity security in connection with service or employment as a director or officer. A "blackoutperiod" is defined as any period of more than three consecutive business days during which theability of not fewer than 50% of the participants or beneficiaries under all individual retirementaccount plans maintained by the issuer to purchase or sell any equity of the issuer held in anindividual account plan is temporarily suspended by the issuer or by a fiduciary of the plan.

This section also requires that participants in retirement plans be provided with written noticeat least 30 days before a blackout period. There are two exceptions to the 30 day notice: 1. thedeferral of the blackout period would violate ERISA provisions requiring fiduciaries to actexclusively on behalf of participants and ERISA provisions requiring trustees to act prudently intheir decisions concerning plan assets could not be complied with or 2. the inability to provide noticeis because of unforeseeable events or circumstances beyond the reasonable control of the planadministrator.

The Secretary of Labor may assess a civil penalty against a plan administrator of up to $100a day from the date of the plan administrator's failure or refusal to provide notice to participants andbeneficiaries.

Section 307 requires the Commission to issue rules in the public interest and for theprotection of investors to set forth minimum standards of professional conduct for attorneys whopractice before the Commission in representing issuers. The rules must require an attorney to reportevidence of a material violation of securities law or breach of fiduciary duty by the company or itsagent to the chief legal counsel or to the chief executive officer of the company. If the counsel orofficer does not respond to the evidence, the attorney must report the evidence to the audit committeeor to the board of directors.

Section 308 allows civil penalties levied by the Commission as a result of any judicial oradministrative action to be placed into a disgorgement fund for the benefit of harmed investors. TheSEC may also accept gifts and bequests for this fund.

Title IV: Enhanced Financial Disclosures

Section 401 requires each financial report filed as part of periodic disclosures by an issuerto reflect all material correcting adjustments identified by a registered public accounting firm.

The Commission is required to issue rules providing that annual and quarterly financial reports filed with the Commission shall disclose all material off-balance sheet transactions that mayhave a material current or future effect on financial condition, changes in financial condition, orsignificant components of revenues or expenses.

The Commission must also issue rules providing that pro forma financial informationincluded in any report filed with the SEC shall not contain an untrue statement of a material fact oromit to state a material fact necessary in order to make the pro forma financial information notmisleading.

The SEC is required to conduct a thorough study of special purpose entities, including thepotential exposure faced by investors.

Section 402 prohibits personal loans of any kind by an issuer to a director or executive officerof the issuer.

Section 403 requires insiders, defined as officers, directors, and 10% shareholders, to filewith the SEC reports of their trades of the issuer's stock before the end of the second business dayon which the trade occurred or at such other time if the SEC determines that the two-day period isnot feasible. Beginning within one year after passage of this Act, the filing shall be doneelectronically and the information shall be provided on an Internet site within one day after filing.

Section 404 requires the Commission to prescribe rules requiring each annual report tocontain an internal control report which shall state the responsibility of management for establishingand maintaining an adequate internal control structure and procedures for financial reporting and anassessment of the effectiveness of the internal control structure and procedures of the issuer forfinancial reporting.

Section 405 exempts registered investment companies from certain disclosure requirements,such as filing a statement assessing the effectiveness of internal controls.

Section 406 requires the SEC to issue rules to require each issuer to disclose whether or not,and, if not, the reason why, it has adopted a code of ethics for senior financial officers, such as theprincipal financial officer, comptroller, or principal accounting officer.

Section 407 requires the Commission to issue rules to require each issuer to disclose whetheror not, and, if not, the reason why, the audit committee of that issuer has at least one member whois a financial expert. A "financial expert" is a person who: 1. has an understanding of generallyaccepted accounting principles and financial statements; 2. experience in the preparation or auditingof financial statements of generally comparable issuers; 3. experience in the application of theseprinciples in connection with the accounting for estimates, accruals, and reserves; 4. experience withinternal accounting controls; and 5. an understanding of audit committee functions.

Section 408 requires the Commission to review disclosures by issuers at least once everythree years.

Section 409 requires each issuer to disclose in plain English to the public on a rapid andcurrent basis additional information concerning material changes in the financial condition andoperations of the issuer.

Title V: Analyst Conflicts of Interest

Section 501 requires the Commission or a registered securities association or nationalsecurities exchange within one year to adopt rules designed to address conflicts of interest facingsecurities analysts. These rules must restrict the pre-publication clearance of research orrecommendations by investment bankers not directly responsible for investment research, limit thesupervision and compensatory evaluation of research personnel to officials not engaged ininvestment activities, and protect securities analysts from retaliation or threats of retaliation byinvestment banking staff because of unfavorable research reports.

The rules must also require a stock analyst to disclose the extent to which he owns stockbeing discussed, whether he or his employer has received any income from the company whose stockis being discussed, whether his employer has had any business dealings within the past year with thecompany, and whether the analyst's compensation was tied to investment banking revenue.

Title VI: Commission Resources and Authority

Section 601 authorizes the appropriations of the SEC for fiscal year 2003. It shall receive$776,000,000, of which $102,700,000 shall be available to fund additional compensation, includingsalaries and benefits; $108,400,000 shall be available for information technology, securityenhancements, and recovery and mitigation activities in light of the attacks on September 11, 2001;and $98,000,000 shall be available to add at least 200 qualified professionals to provide enhancedoversight of auditors and audit services and support staff to strengthen full disclosure.

Section 602 authorizes the Commission to censure any person or deny to any person theprivilege of appearing or practicing before the Commission if the Commission finds that person notto possess the qualifications to represent others, to be lacking in character or integrity or to haveengaged in unethical or improper professional conduct, or to have willfully violated or willfullyaided or abetted the violation of the securities laws or regulations.

Section 603 allows a court to prohibit a person from participating in an offering of pennystock.

Section 604 authorizes the SEC to bar from the securities industry persons who have beensuspended or barred by a state securities, banking, or insurance regulator because of fraudulent,manipulative, or deceptive conduct.

Title VII: Studies and Reports

This title requires that a number of studies and reports be conducted. For example, theComptroller General is required to conduct a study concerning factors leading to the consolidationof public accounting firms. The Commission is required to conduct a study concerning the role andfunction of credit rating agencies in the operation of the securities market. The Commission is alsorequired to conduct a study of securities professionals who have aided and abetted violations of thefederal securities laws. The Commission must review and analyze its enforcement actionsconcerning violations of securities law reporting requirements and restatements of financialstatements over the past five years. The General Accounting Office is required to conduct a studyon the role of investment banks and financial advisers in assisting public companies in manipulatingtheir earnings and obscuring their true financial condition. GAO is specifically directed to addressthe role of investment banks in the bankruptcy of Enron and the failure of Global Crossing.

Title VIII: Corporate and Criminal Fraud Accountability

Section 801 indicates that Title VIII of the bill may be cited as the "Corporate and CriminalFraud Accountability Act of 2002."

Section 802 creates two new federal crimes. 18 U.S.C. Â§ 1519 imposes criminal sanctionsfor destruction, alteration, or falsification of records in federal investigations and bankruptcy. Underthis section, anyone who "knowingly alters, destroys, mutilates, conceals, covers up, falsifies, ormakes a false entry in any record, document, or tangible object with the intent to impede, obstruct,or influence the investigation or proper administration of any department or agency of the UnitedStates or any case filed under title 11 [of the United States Code, dealing with bankruptcy], or inrelation to or in contemplation of any such matter or case" would be subject, upon conviction, toimprisonment of up to 20 years, a fine under title 18 of the United States Code, or both. Under 18U.S.C. Â§ 3571, individuals convicted of a felony may be fined the greater of either the amount setforth in the offense statute or an amount not more than $250,000, while the maximum fine for anorganization convicted of a felony would be the greater of the amount set forth in the offense statuteor an amount of not more than $500,000. This section also provides for an alternative fine based onpecuniary gain or loss. If anyone has derived pecuniary gain from the offense or if the offense resultsin pecuniary loss to any person, the defendant may be fined not more than the greater of twice thegross gain or twice the gross loss, unless the imposition of a fine under this subsection would undulycomplicate or prolong the sentencing process.

New 18 U.S.C. Â§ 1520, in part, provides criminal sanctions for destruction of corporate auditrecords. Under subsection 1520(a)(1), an accountant who conducts an audit of an issuer of securitiesto which 15 U.S.C. Â§ 78j-1(a) applies is required to maintain all audit or review workpapers for 5years after the end of the fiscal period within which the audit or review was concluded. Subsection1520(a)(2) directs the SEC to promulgate rules and regulations within 180 days, after a notice andcomment period, regarding record retention relating to such an audit or review, and authorizes theSEC to amend or supplement them. Anyone who knowingly and willfully violates 18 U.S.C. Â§1520(a)(1) or any rules or regulations promulgated under 18 U.S.C. Â§ 1520(b) is subject to a fineunder title 18 of the U.S. Code, (3) imprisonment of not more than 10 years, or both. (4) The provisions ofnew 18U.S.C. Â§ 1520 do not alter any other obligations or duties imposed by federal or state laws orregulations regarding record retention. (5)

Section 803 renders debts incurred in violation of securities fraud laws nondischargeable inbankruptcy proceedings. More specifically, it amends 11 U.S.C. Â§ 523(a) by adding a newsubsection (19) providing that a discharge under 11 U.S.C. Â§Â§ 727, 1141, 1228(a), 1228(b), or1328(b) does not discharge an individual debtor from a debt that meets two criteria: (1) the debt isfor a violation of federal securities laws; state securities laws; regulations under federal or statesecurities laws; common law fraud, deceit or manipulation in connection with the purchase or saleof any security; and (2) the debt results from a judgment, order, consent order, or decree entered ina federal or state judicial or administrative proceeding; a settlement agreement entered into by thedebtor; or a court or administrative order for damages, fine, penalty, citation, restitution,disgorgement, attorney fee, cost, or other payment owed by the debtor.

While creating no new private rights of action, section 804 modifies 28 U.S.C. Â§ 1658 toestablish a statute of limitations for private rights of action involving a claim of fraud, deceit,manipulation, or contrivance in violation of a securities regulatory requirement committed on orafter the effective date of the Act. The new limitation period is the earlier of either 2 years afterdiscovery of the facts constituting the violation or 5 years after the commission of the violation.

Section 805 directs the U.S. Sentencing Commission to review and amend the sentencingguidelines for obstruction of justice and violations of 18 U.S.C. Â§Â§ 1519 and 1520 to ensure that theyare sufficient to deter and punish such offenses. In addition, it directs the Commission to providea specific offense characteristic sentencing enhancement under Guideline 2B1.1 for a fraud offenseendangering the solvency or financial security of a substantial number of victims. Further, theCommission is directed to make certain that the organizational sentencing guidelines under Chapter8 of the U.S. Sentencing Guidelines are sufficient to deter and punish organizational criminalmisconduct. The Commission must promulgate these guidelines or amendments within 180 daysof enactment of the Act.

Section 806 adds new 18 U.S.C. Â§ 1514A, which creates a civil action to protect employeesof publicly traded companies against discrimination in the terms and conditions of employment inretaliation for whistleblowing in securities fraud cases. This section covers situations where suchemployees have engaged in any lawful act to provide information, to cause information to beprovided, or otherwise to assist any investigation by a federal regulatory or law enforcement agency,a Member of Congress or congressional committee, or a person having supervisory authority overthe employee or investigative authority for the employer, regarding any violation of 18 U.S.C. Â§Â§1341 (mail fraud), 1343 (wire fraud), 1344 ( bank fraud), 1348 (securities fraud againstshareholders), or any SEC rule or regulation; or of any federal law regarding fraud againstshareholders. In addition, 18 U.S.C. Â§ 1514A authorizes an employee alleging such wrongfuldischarge or other discrimination to seek relief by filing a complaint with the Secretary of Labor,using procedures set forth in 49 U.S.C. Â§ 42121(b)(1). In the absence of delay due to bad faith ofthe employee, if the Secretary of Labor does not issue a final decision within 180 days, the employeemay bring an action in the appropriate U.S. District Court, seeking de novo review. (6) The section requires that anaction brought pursuant to 18 U.S.C. Â§ 1514A(b)(1) must be commenced within 90 days after thedate on which the violation occurs. (7) Remedies provided an employee prevailing in an action undersection 1514A(b)(1) includes all relief necessary to make him or her whole, including reinstatementwith pre-discrimination seniority status, back pay with interest, and compensation for any specialdamages incurred due to the discrimination, including litigation costs, expert witness fees, andreasonable attorneys fees. (8) Section 1514A(d) leaves the employee with all rights, privileges or remedies under federal or statelaw or any collective bargaining agreement.

Section 807 creates a new securities fraud crime with penalties including a fine under Title18, U.S. Code. (9) Theoffense covers anyone who knowingly executes or attempts to execute a scheme or artifice to defraudany person in connection with a security of an issue with a class of securities registered under 15U.S.C. Â§ 78l or required to file reports under 15 U.S.C. Â§ 78o(d); or to obtain by false or fraudulentpretenses, representations or promises, any money or property in connection with purchase or saleof a class of securities registered under 15 U.S.C. Â§ 78l or required to file reports under 15 U.S.C.Â§78o(d). Upon conviction an offender would face up to 25 years in prison, a fine under Title 18,U.S.C., or both.

Title IX: White Collar Crime Penalty Enhancements

Section 901 designates this title of the Act as the "White-Collar Crime Penalty EnhancementAct of 2002."

Section 902 adds a new 18 U.S.C. Â§ 1349 to the U.S. Code, which indicates that any personwho attempts or conspires to commit an offense under 18 U.S.C. Â§ 1341-1348 (dealing generallywith fraudulent acts of various types) shall face the same penalties as those provided for the offensethat was the object of the attempt or the conspiracy.

Section 903 increases the potential maximum term of imprisonment available uponconviction for mail fraud (18 U.S.C. Â§ 1341) or wire fraud (18 U.S.C. Â§ 1343), other than mail fraudor wire fraud affecting a financial institution, from five years to twenty years.

Section 904 raises the maximum criminal penalties available upon conviction of anyonewillfully violating Title I, subtitle B, part 1 of ERISA, or any regulation or order issued thereunder. Heretofore, 29 U.S.C. Â§ 1131 provided that individual offenders faced a maximum fine of $5,000(unless a larger fine was imposed under 18 U.S.C. Â§ 3571), (10) a maximum term ofimprisonment of 1 year, or both. Section 904 of the Act increases the maximum fine for anindividual defendant convicted under 29 U.S.C. Â§ 1131 to $100,000, and the maximum term ofimprisonment to 10 years. Under the new language in this offense provision, organizationaldefendants will face an increased fine level, raised from $100,000 to $500,000. It is noteworthy thatthe increased maximum term of imprisonment changes this offense from a misdemeanor to afelony. (11)

Section 905 directs the U.S. Sentencing Commission, within 180 days of the date ofenactment of the Act, to review, and, as appropriate, to amend the applicable sentencing guidelinesand related policy statements to implement the Act, thereby ensuring, among other things, that thepertinent guidelines and policy statements reflect the seriousness of the offenses, the growingincidence of such fraud offenses, and the need to modify these guidelines and policy statements todeter, prevent, and punish such offenses.

Section 906 creates a new 18 U.S.C. Â§ 1350, dealing with corporate responsibility forfinancial reports. Subsections 1350(a) and (b) require the chief executive officer and chief financialofficer (or their equivalent) of an issuer to certify the accuracy of periodic financial statements filedby the issuer with the SEC under 15 U.S.C. Â§Â§ 78m(a) or 78o(d) and the compliance of those reportswith statutory requirements in 18 U.S.C. Â§ 1350. Anyone who makes such a certification knowingthat the report accompanying the certifying statement does not meet the statutory requirementswould, upon conviction, face up to $1 million in fine, up to 10 years in prison, or both. Anyonewillfully certifying compliance knowing that the periodic report accompanying the statement doesnot comport with the requirements of 18 U.S.C. Â§ 1350 would face a fine of up to $5 million,imprisonment of not more than 20 years, or both. (12)

Title X: Corporate Tax Returns

Section 1001 states that it is the sense of the Senate that the federal income tax return of acorporation should be signed by the chief executive officer of the corporation.

Title XI: Corporate Fraud Accountability

Section 1101 designates this title of the Act as the "Corporate Fraud Accountability Act of2002."

Section 1102 amends 18 U.S.C. Â§ 1512 to add a new subsection (c) which defines a newcrime. Under this new subsection, anyone who corruptly alters, destroys, mutilates, or conceals arecord, document, or other object with the intent to impair the object's integrity or availability for usein an official proceeding or who otherwise obstructs, influences, or impedes such a proceeding, orattempts to do any of these things, faces a maximum of 20 years in prison, a fine under Title 18, U.S.Code, (13) or both.

Under Section 1103 , 15 U.S.C. Â§ 78u-3 is amended to afford the SEC the right, during thecourse of a lawful investigation of possible securities law violations by an issuer of publicly tradedsecurities or its directors, officers, partners, controlling partners, agents, or employees, the power,under specified circumstances, to petition a U.S. district court for temporary freeze authority. Thismechanism would become available when the SEC deems it likely that the issuer will be makingextraordinary payments to any of those persons. In response to such a petition, the court may requirethe issuer to escrow those payments in an interest-bearing account for 45 days under courtsupervision. Unless impracticable or contrary to the public interest, the court will give those affectednotice and an opportunity to be heard. An order entered under this provision may be extended forup to 45 additional days upon good cause shown. If the issuer or any of those persons referenced ischarged with a securities law violation before the expiration of such an order, the order shallcontinue in effect, subject to court approval, until the conclusion of pertinent legal proceedings. Otherwise, the order will terminate and the payments will be returned to the affected recipients.

Section 1104 directs the U.S. Sentencing Commission to review sentencing guidelinesapplicable to securities fraud, accounting fraud, and related offenses, to consider sentencingenhancements for officers or directors of publicly traded corporations who commit such offenses,and to report thereon to Congress. The section specifies considerations that should be taken intoaccount by the Commission in making its review. The U.S. Sentencing Commission is directed topromulgate resulting new guidelines or amendments to existing guidelines within 180 days of thedate of enactment of the Act.

Section 1105 amends 15 U.S.C. Â§ 78u-3 to provide the Commission authority, in anycease-and-desist proceeding under Section 78u-3(a), to issue an order prohibiting anyone who hasviolated Section 10(b) (15 U.S.C. Â§ 78j(b)) or related rules or regulations from acting as an officeror director of any issuer of a class registered under Section 12 (15 U.S.C. Â§ 78l) or required to filereports pursuant to section 15(d) (15 U.S.C. Â§ 78o(d)), if the person's conduct demonstrates unfitnessto serve in such capacity. In addition, it amends 15 U.S.C. Â§ 77h-1 to authorize the SEC, in such acease-and-desist proceeding, to issue an order prohibiting any person who has violated section17(a)(1) (15 U.S.C. Â§ 78q(a)) or related rules or regulations from acting as an officer or director ofsuch an issuer if the person's conduct demonstrates unfitness to serve in such a capacity. In eitherof these types of orders prohibiting service as an officer or director of such an issuer, the prohibitionmay be conditional or unconditional and may be permanent or for such time as the SEC maydetermine.

Under Section 1106 of the Act, the criminal penalties available under 15 U.S.C. Â§ 78ff(a) forindividual defendants are increased from a maximum fine of $1 million to $5 million and amaximum term of imprisonment from 10 years to 20 years, or both, while the maximum fine fororganizational defendants is increased from $2.5 million to $25 million. (14)

Finally, Section 1107 amends 18 U.S.C. Â§ 1513 to add a new subsection which provides,upon conviction, for imposition of a sentence including a fine under Title 18, U.S. Code;imprisonment for up to 10 years; or both; upon anyone who knowingly takes harmful action,including interference with the lawful employment or livelihood of any person, with intent toretaliate for providing truthful information to a law enforcement officer regarding the commissionor possible commission of any federal offense.