Sarbanes-Oxley Act of 2002
PL 107-204 (H.R.3763), enacted 07/30/2002

PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 745 
Public Law 107-204 
107th Congress 
An Act 
To protect investors by improving the acciiracy and reliability of corporate disclosures 
July 30, 2002 
made pursuant to the securities laws, and for other purposes. 
[H.R 3763] 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
Sarbanes-Oxley 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
Corporate^ 
(a) SHORT TITLE.—This Act may be cited as the "Sarbanes- f/P?Qp'7S*7-
Oxley Act of 2002". 
Jote 
(b) TABLE OF CONTENTS.—The table of contents for this Act 
is as follows: 
Sec. 1. Short title; table of contents. 
Sec. 2. Definitions. 
Sec. 3. Commission rules and enforcement. 
TITLE I—PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD 
Sec. 101. Establishment; administrative provisions. 
Sec. 102. Registration with the Board. 
Sec. 103. Auditing, quality control, and independence standards and rules. 
Sec. 104. Inspections of registered public accounting firms. 
Sec. 105. Investigations and disciplinary proceedings. 
Sec. 106. Foreign public accounting firms. 
Sec. 107. Commission oversight of the Board. 
Sec. 108. Accounting standards. 
Sec. 109. Funding. 
TITLE II—AUDITOR INDEPENDENCE 
Sec. 201. Services outside the scope of practice of auditors. 
Sec. 202. Preapproval requirements. 
Sec. 203. Audit partner rotation. 
Sec. 204. Auditor reports to audit committees. 
Sec. 205. Conforming amendments. 
Sec. 206. Conflicts of interest. 
Sec. 207. Study of mandatory rotation of registered public accounting firms. 
Sec. 208. Commission authority. 
Sec. 209. Considerations by appropriate State regulatory authorities. 
TITLE III—CORPORATE RESPONSIBILITY 
Sec. 301. Public company audit committees. 
Sec. 302. Corporate responsibility for financial reports. 
Sec. 303. Improper influence on conduct of audits. 
Sec. 304. Forfeiture of certain bonuses and profits. 
Sec. 305. Officer and director bars and penalties. 
Sec. 306. Insider trades during pension fund blackout periods. 
Sec. 307. Rules of professional responsibility for attorneys. 
Sec. 308. Fair funds for investors. 
TITLE IV—ENHANCED FINANCIAL DISCLOSURES 
Sec. 401. Disclosures in periodic reports. 
Sec. 402. Enhanced conflict of interest provisions. 
Sec. 403. Disclosvues of transactions involving management and principal stock-
holders. 
116 STAT. 746 
PUBLIC LAW 107-204-JULY 30, 2002 
Sec. 404. Management assessment of internal controls. 
Sec. 405. Exemption. 
Sec. 406. Code of ethics for senior financial officers. 
Sec. 407. Disclosiire of audit committee financial expert. 
Sec. 408. Enhanced review of periodic disclosures by issuers. 
Sec. 409. Real time issuer disclosures. 
TITLE V—ANALYST CONFLICTS OF INTEREST 
Sec. 501. Treatment of securities analysts by registered securities associations and 
national seciirities exchanges. 
TITLE VI—COMMISSION RESOURCES AND AUTHORITY 
Sec. 601. Authorization of appropriations. 
Sec. 602. Appearance and practice before the Commission. 
Sec. 603. Federal court authority to impose penny stock bars. 
Sec. 604. Qualifications of associated persons of brokers and dealers. 
TITLE VII—STUDIES AND REPORTS 
Sec. 701. GAO study and report regarding consolidation of public accounting firms. 
Sec. 702. Commission study and report regarding credit rating agencies. 
Sec. 703. Study and report on violators and violations 
Sec. 704. Study of enforcement actions. 
Sec. 705. Study of investment banks. 
TITLE VIII—CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY 
Sec. 801. Short title. 
Sec. 802. Criminal penalties for altering documents. 
Sec. 803. Debts nondischargeable if incurred in violation of securities fi-aud laws. 
Sec. 804. Statute of limitations for securities fraud. 
Sec. 805. Review of Federal Sentencing Guidelines for obstruction of justice and ex-
tensive criminal fraud. 
Sec. 806. Protection for employees of publicly traded companies who provide evi-
dence of fi-aud. 
Sec. 807. Criminal penalties for defrauding shareholders of publicly traded compa-
nies. 
TITLE IX—WHITE-COLLAR CRIME PENALTY ENHANCEMENTS 
Sec. 901. Short title. 
Sec. 902. Attempts and conspiracies to commit criminal fraud offenses. 
Sec. 903. Crimined penalties for mail and wire fi"aud. 
Sec. 904. Criminal penalties for violations of the Employee Retirement Income Se-
curity Act of 1974. 
Sec. 905. Amendment to sentencing guideUnes relating to certain white-collar of-
fenses. 
Sec. 906. Corporate responsibility for financial reports. 
TITLE 
X—CORPORATE 
TAX 
RETURNS 
Sec. 1001. Sense of the Senate regarding the signing of corporate tax returns by 
chief executive officers. 
TITLE XI—CORPORATE FRAUD AND ACCOUNTABILITY 
Sec. 1101. Short title. 
Sec. 1102. Tampering with a record or otherwise impeding an official proceeding. 
Sec. 1103. Temporary freeze authority for the Securities and Exchange Commis-
sion. 
Sec. 1104. Amendment to the Federal Sentencing GuideUnes. 
Sec. 1105. Authority of the Commission to prohibit persons from serving as officers 
or directors. 
Sec. 1106. Increased criminal penalties under Seciirities Exchange Act of 1934. 
15 u s e 7201. 
SEC. 2. DEFECTIONS. 
(a) IN GENERAL.—In this Act, the following definitions shall 
apply: 
(1) APPROPRIATE STATE REGULATORY AUTHORITY.—The t e r m 
"appropriate State regulatory authority" means the State 
agency or other authority responsible for the licensure or other 
regulation of the practice of accounting in the State or States 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 747 
having jurisdiction over a registered public accounting firm 
or associated person thereof, with respect to the matter in 
question. 
(2) AUDIT.—The term "audit" means an examination of 
the financial statements of any issuer by an independent public 
accounting firm in accordance with the rules of the Board 
or the Commission (or, for the period preceding the adoption 
of applicable rules of the Board under section 103, in accordance 
with then-applicable generally accepted auditing and related 
standards for such purposes), for the purpose of expressing 
an opinion on such statements. 
(3) 
AUDIT 
COMMITTEE.—The term 
"audit 
committee" 
means— 
(A) a committee (or equivalent body) established by 
and amongst the board of directors of an issuer for the 
purpose 
of overseeing the 
accounting 
and 
financial 
reporting processes of the issuer and audits of the financial 
statements of the issuer; and 
(B) if no such committee exists with respect to an 
issuer, the entire board of directors of the issuer. 
(4) AUDIT REPORT.—The term "audit report" means a docu-
ment or other record— 
(A) prepared following an audit performed for purposes 
of compliance by an issuer with the requirements of the 
securities laws; and 
(B) in which a public accounting firm either— 
(i) sets forth the opinion of that firm regarding 
a financial statement, report, or other document; or 
(ii) asserts that no such opinion can be expressed. 
(5) BOARD.—The term "Board" means the Public Company 
Accounting Oversight Board established under section 101. 
(6) COMMISSION.—The term "Commission" means the Secu-
rities and Exchange Commission. 
(7) ISSUER.—The term "issuer" means an issuer (as defined 
in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 
78c)), the securities of which are registered under section 12 
of that Act (15 U.S.C. 781), or that is required to file reports 
under section 15(d) (15 U.S.C. 78o(d)), or that files or has 
filed a registration statement that has not yet become effective 
under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and 
that it has not withdrawn. 
(8) NON-AUDIT SERVICES.—^The term "non-audit services" 
means any professional services provided to an issuer by a 
registered public accounting firm, other than those provided 
to an issuer in connection with an audit or a review of the 
financial statements of an issuer. 
(9) PERSON ASSOCIATED WITH A PUBLIC ACCOUNTING FIRM.— 
(A) IN GENERAL.—The terms "person associated with 
a public accounting firm" (or with a "registered public 
accounting firm") and "associated person of a public 
accounting firm" (or of a "registered public accounting 
firm") mean any individual proprietor, partner, share-
holder, 
principal, 
accountant, 
or 
other 
professional 
employee of a public accounting firm, or any other inde-
pendent contractor or entity that, in connection with the 
preparation or issuance of any audit report— 
116 STAT. 748 
PUBLIC LAW 107-204-^ULY 30, 2002 
(i) shares in the profits of, or receives compensation 
in any other form from, that firm; or 
(ii) participates as agent or otherwise on behalf 
of such accounting firm in any activity of that firm. 
(B) EXEMPTION AUTHORITY.—The Board may, by rule, 
exempt persons engaged only in ministerial tasks from 
the definition in subparagraph (A), to the extent that the 
Board determines that any such exemption is consistent 
with the purposes of this Act, the public interest, or the 
protection of investors. 
(10) PROFESSIONAL STANDARDS.—^The term "professional 
standards" means— 
(A) accounting principles that are— 
(i) established by the standard setting body 
described in section 19(b) of the Securities Act of 1933, 
as amended by this Act, or prescribed by the Commis-
sion under section 19(a) of that Act (15 U.S.C. 17a(s)) 
or section 13(b) of the Securities Exchange Act of 1934 
(15 U.S.C. 78a(m)); and 
(ii) relevant to audit reports for particular issuers, 
or dealt with in the quality control system of a par-
ticular registered public accounting firm; and 
(B) auditing standards, stsindards for 
attestation 
engagements, quality control policies and procedures, eth-
ic^ and competency standards, and independence stand-
ards (including rules implementing title II) that the Board 
or the Commission determines— 
(i) relate to the preparation or issuance of audit 
reports for issuers; and 
(ii) are established or adopted by the Board under 
section 103(a), or are promulgated as rules of the 
Commission. 
(11) 
PUBLIC 
ACCOUNTING 
FIRM.—^The 
term 
"public 
accounting firm" means— 
(A) a proprietorship, partnership, incorporated associa-
tion, corporation, limited liability company, limited liability 
partnership, or other legal entity that is engaged in the 
practice of public accounting or preparing or issuing audit 
reports; and 
(B) to the extent so designated by the rules of the 
Board, any associated person of any entity described in 
subparagraph (A). 
(12) REGISTERED PUBLIC ACCOUNTING FIRM.—The term "reg-
istered public accounting firm" means a public accounting firm 
registered with the Board in accordance with this Act. 
(13) RULES OF THE BOARD.—The term "rules of the Board" 
means the bylaws and rules of the Board (as submitted to, 
and approved, modified, or amended by the Commission, in 
accordance with section 107), and those stated policies, prac-
tices, and interpretations of the Board that the Commission, 
by rule, may deem to be rules of the Board, as necessary 
or appropriate in the public interest or for the protection of 
investors. 
(14) SECURITY.—The term "security" has the same meaning 
as in section 3(a) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)). 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 749 
(15) SECURITIES LAWS.—The term "securities laws" means 
the provisions of law referred to in section 3(a)(47) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), as 
amended by this Act, and includes the rules, regulations, and 
orders issued by the Commission thereunder. 
(16) STATE.—The term "State" means any State of the 
United States, the District of Columbia, Puerto Rico, the Virgin 
Islands, or any other territory or possession of the United 
States. 
(b) CONFORMING AMENDMENT.—Section 3(a)(47) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) is amended by 
inserting "the Sarbanes-Oxley Act of 2002," before "the Public". 
SEC. 3. COMMISSION RULES AND ENFORCEMENT. 
15 USC 7202. 
(a) REGULATORY ACTION.—The Commission shall promulgate 
such rules and regulations, as may be necessary or appropriate 
in the public interest or for the protection of investors, and in 
furtherance of this Act. 
(b) ENFORCEMENT.— 
(1) IN GENERAL.—^A violation by any person of this Act, 
any rule or regulation of the Commission issued under this 
Act, or any rule of the Board shall be treated for all purposes 
in the same manner as a violation of the Securities Exchange 
Act of 1934 (15 U.S.C. 78a et seq.) or the rules and regulations 
issued thereunder, consistent with the provisions of this Act, 
and any such person shall be subject to the same penalties, 
and to the same extent, as for a violation of that Act or 
such rules or regulations. 
(2) INVESTIGATIONS, INJUNCTIONS, AND PROSECUTION OF 
OFFENSES.—Section 21 of the Securities Exchange Act of 1934 
(15 U.S.C. 78u) is amended— 
(A) in subsection (a)(1), by inserting "the rules of the 
Public Company Accounting Oversight Board, of which such 
person is a registered public accounting firm or a person 
associated with such a firm," after "is a participant,"; 
(B) in subsection (d)(1), by inserting "the rules of the 
Public Company Accounting Oversight Board, of which such 
person is a registered public accounting firm or a person 
associated with such a firm," after "is a participant,"; 
(C) in subsection (e), by inserting "the rules of the 
Public Company Accounting Oversight Board, of which such 
person is a registered public accounting firm or a person 
associated with such a firm," after "is a participant,"; and 
(D) in subsection (f), by inserting "or the Public Com-
pany Accounting Oversight Board" after "self-regulatory 
organization" each place that term appears. 
(3) CEASE-AND-DESIST PROCEEDINGS.—Section 21C(c)(2) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) 
is amended by inserting "registered public accounting firm (as 
defined in section 2 of the Sarbanes-Oxley Act of 2002)," after 
"government securities dealer,". 
(4) ENFORCEMENT BY FEDERAL BANKING AGENCIES.—Section 
12(i) of the Securities Exchange Act of 1934 (15 U.S.C. 781(i)) 
is amended by— 
(A) striking "sections 12," each place it appears and 
inserting "sections 10A(m), 12,"; and 
116 STAT. 750 
PUBLIC LAW 107-204-^ULY 30, 2002 
(B) striking "and 16," each place it appears and 
inserting "and 16 of this Act, and sections 302, 303, 304, 
306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act 
of 2002,". 
(c) EFFECT ON COMMISSION AUTHORITY.—Nothing in this Act 
or the rules of the Board shall be construed to impair or limit— 
(1) the authority of the Commission to regulate the 
accounting profession, accounting firms, or persons associated 
with such firms for purposes of enforcement of the securities 
laws; 
(2) the authority of the Commission to set standards for 
accounting or auditing practices or auditor independence, 
derived from other provisions of the securities laws or the 
rules or regulations thereunder, for purposes of the preparation 
and issuance of any audit report, or otherwise under applicable 
law; or 
(3) the ability of the Commission to take, on the initiative 
of the Commission, legal, administrative, or disciplinary action 
against any registered public accounting firm or any associated 
person thereof. 
TITLE I—PUBLIC COMPANY 
ACCOUNTING OVERSIGHT BOARD 
15 use 7211. 
SEC. 101. ESTABLISHMENT; ADMINISTRATIVE PROVISIONS. 
(a) ESTABLISHMENT OF BOARD.—There is established the Public 
Company Accounting Oversight Board, to oversee the audit of public 
companies that are subject to the securities laws, and related mat-
ters, in order to protect the interests of investors and further 
the public interest in the preparation of informative, accurate, 
and independent audit reports for companies the securities of which 
are sold to, and held by and for, public investors. The Board shall 
be a body corporate, operate as a nonprofit corporation, and have 
succession until dissolved by an Act of Congress. 
(b) STATUS.—The Board shall not be an agency or establishment 
of the United States Government, and, except as otherwise provided 
in this Act, shall be subject to, and have all the powers conferred 
upon a nonprofit corporation by, the District of Columbia Nonprofit 
Corporation Act. No member or person employed by, or agent for, 
the Board shall be deemed to be an officer or employee of or 
agent for the Federal Government by reason of such service. 
(c) DUTIES OF THE BOARD.—The Board shall, subject to action 
by the Commission under section 107, and once a determination 
is made by the Commission under subsection (d) of this section— 
(1) register public accounting firms that prepare audit 
reports for issuers, in accordance with section 102; 
(2) establish or adopt, or both, by rule, auditing, quality 
control, ethics, independence, and other standards relating to 
the preparation of audit reports for issuers, in accordance with 
section 103; 
(3) conduct inspections of registered public accounting 
firms, in accordance with section 104 and the rules of the 
Board; 
(4) conduct investigations and disciplinary proceedings con-
cerning, and impose appropriate sanctions where justified upon. 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 751 
registered public accounting firms and associated persons of 
such firms, in accordance with section 105; 
(5) perform such other duties or functions as the Board 
(or the Commission, by rule or order) determines are necessary 
or appropriate to promote high professional standards among, 
and improve the quality of audit services offered by, registered 
public accounting firms and associated persons thereof, or other-
wise to carry out this Act, in order to protect investors, or 
to further the public interest; 
(6) enforce compliance with this Act, the rules of the Board, 
professional standards, and the securities laws relating to the 
preparation and issuance of audit reports and the obligations 
and liabilities of accountants with respect thereto, by registered 
public accounting firms and associated persons thereof; and 
(7) set the budget and manage the operations of the Board 
and the staff of the Board. 
(d) COMMISSION DETERMINATION.—The members of the Board 
shall take such action (including hiring of staff, proposal of rules, 
and adoption of initial and transitional auditing and other profes-
sional standards) as may be necessary or appropriate to enable 
the Commission to determine, not later than 270 days after the 
date of enactment of this Act, that the Board is so organized 
and has the capacity to carry out the requirements of this title, 
and to enforce compliance with this title by registered public 
accounting firms and associated persons thereof. The Commission 
shall be responsible, prior to the appointment of the Board, for 
the planning for the establishment and administrative transition 
to the Board's operation. 
(e) BOARD MEMBERSHIP.— 
(1) COMPOSITION.—^The Board shall have 5 members, 
appointed from among prominent individuals of integrity and 
reputation who have a demonstrated commitment to the 
interests of investors and the public, and an understanding 
of the responsibilities for and nature of the financial disclosures 
required of issuers under the securities laws and the obligations 
of accountants with respect to the preparation and issuance 
of audit reports with respect to such disclosures. 
(2) LIMITATION.—Two members, and only 2 members, of 
the Board shall be or have been certified public accountants 
pursuant to the laws of 1 or more States, provided that, if 
1 of those 2 members is the chairperson, he or she may not 
have been a practicing certified public accountant for at least 
5 years prior to his or her appointment to the Board. 
(3) FULL-TIME INDEPENDENT SERVICE.—Each member of the 
Board shall serve on a full-time basis, and may not, concurrent 
with service on the Board, be employed by any other person 
or engage in any other professional or business activity. No 
member of the Board may share in any of the profits of, 
or receive payments from, a public accounting firm (or any 
other person, as determined by rule of the Commission), other 
than fixed continuing pa3Tiients, subject to such conditions as 
the Commission may impose, under standard arrangements 
for the retirement of members of public accounting firms. 
(4) APPOINTMENT OF BOARD MEMBERS.— 
(A) INITIAL BOARD.—Not later than 90 days after the Deadline, 
date of enactment of this Act, the Commission, after con-
sultation with the Chairman of the Board of Governors 
116 STAT. 752 
PUBLIC LAW 107-204-^ULY 30, 2002 
of the Federal Reserve System and the Secretary of the 
Treasury, shall appoint the chairperson and other initial 
members of the Board, and shall designate a term of service 
for each. 
(B) VACANCIES.—^A vacancy on the Board shall not 
affect the powers of the Board, but shall be filled in the 
same manner as provided for appointments under this 
section. 
(5) TERM OF SERVICE.— 
(A) IN GENERAL.—The term of service of each Board 
member shall be 5 years, and until a successor is appointed, 
except that— 
(i) the terms of office of the initial Board members 
(other than the chairperson) shall expire in annual 
increments, 1 on each of the first 4 anniversaries of 
the initial date of appointment; and 
(ii) any Board member appointed to fill a vacsmcy 
occurring before the expiration of the term for which 
the predecessor was appointed shall be appointed only 
for the remainder of that term. 
(B) TERM LIMITATION.—^No person may serve as a 
member of the Board, or as chairperson of the Board, 
for more than 2 terms, whether or not such terms of 
service are consecutive. 
(6) REMOVAL FROM OFFICE.—^A member of the Board may 
be removed by the Commission from office, in accordance with 
section 107(d)(3), for good cause shown before the expiration 
of the term of that member. 
(f) POWERS OF THE BOARD.—In addition to any authority 
granted to the Board otherwise in this Act, the Board shall have 
the power, subject to section 107— 
(1) to sue and be sued, complain and defend, in its corporate 
name and through its own counsel, with the approval of the 
Commission, in any Federal, State, or other court; 
(2) to conduct its operations and maintain offices, and 
to exercise all other rights and powers authorized by this Act, 
in any State, without regard to any qualification, licensing, 
or other provision of law in effect in such State (or a political 
subdivision thereof); 
(3) to lease, purchase, accept gifts or donations of or other-
wise acquire, improve, use, sell, exchange, or convey, all of 
or an interest in any property, wherever situated; 
(4) to appoint such employees, accountants, attorneys, and 
other agents as may be necessary or appropriate, and to deter-
mine their qualifications, define their duties, and fix their 
salaries or other compensation (at a level that is comparable 
to private sector self-regulatory, accounting, technical, super-
visory, or other staff or management positions); 
(5) to allocate, assess, and collect accounting support fees 
established pursuant to section 109, for the Board, and other 
fees and charges imposed under this title; and 
Contracts. 
(6) to enter into contracts, execute instruments, incur liabil-
ities, and do any and all other acts and things necessary, 
appropriate, or incidental to the conduct of its operations and 
the exercise of its obligations, rights, Eind powers imposed or 
granted by this title. 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 753 
(g) RULES OF THE BOARD.—The rules of the Board shall, subject 
to the approval of the Commission— 
(1) provide for the operation and administration of the 
Board, the exercise of its authority, and the performance of 
its responsibilities under this Act; 
(2) permit, as the Board determines necessary or appro-
priate, delegation by the Board of any of its functions to an 
individual member or employee of the Board, or to a division 
of the Board, including functions with respect to hearing, deter-
mining, ordering, certifying, reporting, or otherwise acting as 
to any matter, except that— 
(A) the Board shall retain a discretionary right to 
review any action pursuant to any such delegated function, 
upon its own motion; 
(B) a person shall be entitled to a review by the Board 
with respect to any matter so delegated, and the decision 
of the Board upon such review shall be deemed to be 
the action of the Board for all purposes (including appeal 
or review thereof); and 
(C) if the right to exercise a review described in 
subparagraph (A) is declined, or if no such review is sought 
within the time stated in the rules of the Board, then 
the action taken by the holder of such delegation shall 
for all purposes, including appeal or review thereof, be 
deemed to be the action of the Board; 
(3) establish ethics rules and standards of conduct for Board 
members and staff, including a bar on practice before the 
Board (and the Commission, with respect to Board-related mat-
ters) of 1 year for former members of the Board, and appropriate 
periods (not to exceed 1 year) for former staff of the Board; 
and 
(4) provide as otherwise required by this Act. 
(h) ANNUAL REPORT TO THE COMMISSION.—^The Board shall Deadline, 
submit an annual report (including its audited financial statements) 
to the Commission, and the Commission shall transmit a copy 
of that report to the Committee on Banking, Housing, and Urban 
Affairs of the Senate, and the Committee on Financial Services 
of the House of Representatives, not later than 30 days after the 
date of receipt of that report by the Commission. 
SEC. 102. REGISTRATION WITH THE BOARD. 
15 USC 7212. 
(a) MANDATORY REGISTRATION.—Beginning 180 days after the 
date of the determination of the Commission under section 101(d), 
it shall be unlawful for any person that is not a registered public 
accounting firm to prepare or issue, or to participate in the prepara-
tion or issuance of, any audit report with respect to any issuer. 
(b) APPLICATIONS FOR REGISTRATION.— 
(1) FORM OF APPLICATION.—^A public accounting firm shall 
use such form as the Board may prescribe, by rule, to apply 
for registration under this section. 
(2) CONTENTS OF APPLICATIONS.—Each public accounting 
firm shall submit, as part of its application for registration, 
in such detail as the Board shall specify— 
(A) the names of all issuers for which the firm prepared 
or issued audit reports during the immediately preceding 
calendar year, and for which the firm expects to prepare 
or issue audit reports during the current calendar year; 
116 STAT. 754 
PUBLIC LAW 107-204-^ULY 30, 2002 
Deadline. 
(B) the annual fees received by the firm from each 
such issuer for audit services, other accounting services, 
and non-audit services, respectively; 
(C) such other current financial information for the 
most recently completed fiscal year of the firm as the 
Board may reasonably request; 
(D) a statement of the quality control policies of the 
firm for its accounting and auditing practices; 
(E) a list of all accountants associated with the firm 
who participate in or contribute to the preparation of audit 
reports, stating the license or certification number of each 
such person, as well as the State license numbers of the 
firm itself; 
(F) information relating to criminal, civil, or adminis-
trative actions or disciplinary proceedings pending against 
the firm or any associated person of the firm in connection 
with any audit report; 
(G) copies of any periodic or annual disclosure filed 
by an issuer with the Commission during the immediately 
preceding calendar year which discloses accounting dis-
agreements between such issuer and the firm in connection 
with an audit report furnished or prepared by the firm 
for such issuer; and 
(H) such other information as the rules of the Board 
or the Commission shall specify as necessary or appropriate 
in the public interest or for the protection of investors, 
(3) CONSENTS.—Each application for registration under this 
subsection shall include— 
(A) a consent executed by the public accounting firm 
to cooperation in and compliance with any request for 
testimony or the production of documents made by the 
Board in the furtherance of its authority and responsibil-
ities under this title (and an agreement to secure and 
enforce similar consents from each of the associated persons 
of the public accounting firm as a condition of their contin-
ued employment by or other association with such firm); 
and 
(B) a statement that such firm understands and agrees 
that cooperation and compliance, as described in the con-
sent required by subparagraph (A), and the securing and 
enforcement of such consents from its associated persons, 
in accordance with the rules of the Board, shall be a 
condition to the continuing effectiveness of the registration 
of the firm with the Board. 
(c) ACTION ON APPLICATIONS.— 
(1) TIMING.—The Board shall approve a completed applica-
tion for registration not later than 45 days after the date 
of receipt of the application, in accordance with the rules of 
the Board, unless the Board, prior to such date, issues a written 
notice of disapproval to, or requests more information from, 
the prospective registrant. 
(2) TREATMENT.—^A written notice of disapproval of a com-
pleted application under paragraph (1) for registration shall 
be treated as a disciplinary sanction for purposes of sections 
105(d) and 107(c). 
(d) PERIODIC REPORTS.—Each registered public accounting firm 
shall submit an annual report to the Board, and may be required 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 755 
to report more frequently, as necessary to update the information 
contained in its application for registration under this section, and 
to provide to the Board such additional information as the Board 
or the Commission may specify, in accordance with subsection (b)(2). 
(e) PUBLIC AVAILABILITY.—Registration applications and annual 
reports required by this subsection, or such portions of such applica-
tions or reports as may be designated under rules of the Board, 
shall be made available for public inspection, subject to rules of 
the Board or the Commission, and to applicable laws relating to 
the confidentiality of proprietary, personal, or other information 
contained in such applications or reports, provided that, in all 
events, the Board shall protect from public disclosure information 
reasonably identified by the subject accounting firm as proprietary 
information. 
(f) REGISTRATION AND ANNUAL FEES.—The Board shall assess 
and collect a registration fee and an annual fee from each registered 
public accounting firm, in amounts that are sufficient to recover 
the costs of processing and reviewing applications and annual 
reports. 
SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE STAND- 
15 USC 7213. 
A R D S AND RULES. 
(a) AUDITING, QUALITY CONTROL, AND ETHICS STANDARDS.— 
(1) IN GENERAL.—The Board shall, by rule, establish, 
including, to the extent it determines appropriate, through 
adoption of standards proposed by 1 or more professional groups 
of accountants designated pursuant to paragraph (3)(A) or 
advisory groups convened pursuant to paragraph (4), and 
amend or otherwise modify or alter, such auditing and related 
attestation standards, such quality control standards, and such 
ethics standards to be used by registered public accounting 
firms in the preparation and issuance of audit reports, as 
required by this Act or the rules of the Commission, or as 
may be necessary or appropriate in the public interest or for 
the protection of investors. 
(2) RULE REQUIREMENTS.—In carrying out paragraph (1), 
the Board— 
(A) shall include in the auditing standards that it 
adopts, requirements that each registered public accounting 
firm shall— 
(i) prepare, and maintain for a period of not less 
than 7 years, audit work papers, and other information 
related to any audit report, in sufficient detail to sup-
port the conclusions reached in such report; 
(ii) provide a concurring or second partner review 
and approval of such audit report (and other related 
information), and concurring approval in its issuance, 
by a qualified person (as prescribed by the Board) 
associated with the public accounting firm, other than 
the person in charge of the audit, or by an independent 
reviewer (as prescribed by the Board); and 
(iii) describe in each audit report the scope of 
the auditor's testing of the internal control structure 
and procedures of the issuer, required by section 
404(b), and present (in such report or in a separate 
report)— 
116 STAT. 756 
PUBLIC LAW 107-204-JULY 30, 2002 
(I) the findings of the auditor from such 
testing; 
(II) an evaluation of whether such internal 
control structure and procedures— 
(aa) include maintenance of records that 
in reasonable detail accurately and fairly 
reflect the transactions and dispositions of the 
assets of the issuer; 
(bb) provide reasonable assurance that 
transactions are recorded as necessary to 
permit preparation of financial statements in 
accordance with generally accepted accounting 
principles, and that receipts and expenditures 
of the issuer are being made only in accord-
ance with authorizations of management and 
directors of the issuer; and 
(III) a description, at a minimum, of material 
weaknesses in such internal controls, and of any 
material noncompliance found on the basis of such 
testing. 
(B) shall include, in the quality control standards that 
it adopts with respect to the issuance of audit reports, 
requirements for every registered public accounting firm 
relating to— 
(i) monitoring of professional ethics and independ-
ence from issuers on behalf of which the firm issues 
audit reports; 
(ii) consultation within such firm on accounting 
and auditing questions; 
(iii) supervision of audit work; 
(iv) hiring, profession£d development, and advance-
ment of personnel; 
(v) the acceptance and continuation of engage-
ments; 
(vi) internal inspection; and 
(vii) such other requirements as the Board may 
prescribe, subject to subsection (a)(1). 
(3) AUTHORITY TO ADOPT OTHER STANDARDS.— 
(A) IN GENERAL.—In carrying out this subsection, the 
Board— 
(i) may adopt as its rules, subject to the terms 
of section 107, any portion of any statement of auditing 
standards or other professional standards that the 
Board determines satisfy the requirements of para-
graph (1), and that were proposed by 1 or more profes-
sional groups of accountants that shall be designated 
or recognized by the Board, by rule, for such purpose, 
pursuant to this paragraph or 1 or more advisory 
groups convened pursuant to paragraph (4); and 
(ii) notwithstanding clause (i), shall retain full 
authority to modify, supplement, revise, or subse-
quently amend, modify, or repeal, in whole or in part, 
any portion of any statement described in clause (i). 
(B) INITIAL AND TRANSITIONAL STANDARDS.—The Board 
shall adopt standards described in subparagraph (A)(i) as 
initial or transitional standards, to the extent the Board 
determines necessary, prior to a determination of the 
PUBLIC LAW 107-204^^ULY 30, 2002 
116 STAT. 757 
Commission under section 101(d), and such standards shall 
be separately approved by the Commission at the time 
of that determination, without regard to the procedures 
required by section 107 that otherwise would apply to 
the approval of rules of the Board. 
(4) 
ADVISORY GROUPS.—The Board shall convene, or 
authorize its staff to convene, such expert advisory groups 
as may be appropriate, which may include practicing account-
ants and other experts, as well as representatives of other 
interested groups, subject to such rules as the Board may 
prescribe to prevent conflicts of interest, to make recommenda-
tions concerning the content (including proposed drafts) of 
auditing, quality control, ethics, independence, or other stand-
ards required to be established under this section. 
(b) INDEPENDENCE STANDARDS AND RULES.—The Board shall 
establish such rules as may be necessary or appropriate in the 
public interest or for the protection of investors, to implement, 
or as authorized under, title II of this Act. 
(c) COOPERATION WITH DESIGNATED PROFESSIONAL GROUPS OF 
ACCOUNTANTS AND ADVISORY GROUPS.— 
(1) IN GENERAL.—The Board shall cooperate on an ongoing 
basis with professional groups of accountants designated under 
subsection (a)(3)(A) and advisory groups convened under sub-
section (a)(4) in the examination of the need for changes in 
any standards subject to its authority under subsection (a), 
recommend issues for inclusion on the agendas of such des-
ignated professional groups of accountants or advisory groups, 
and take such other steps as it deems appropriate to increase 
the effectiveness of the standard setting process. 
(2) BOARD RESPONSES.—The Board shall respond in a timely 
fashion to requests from designated professional groups of 
accountants and advisory groups referred to in paragraph (1) 
for any changes in standards over which the Board has 
authority. 
(d) EVALUATION OF STANDARD SETTING PROCESS.—The Board 
shall include in the annual report required by section 101(h) the 
results of its standard setting responsibilities during the period 
to which the report relates, including a discussion of the work 
of the Board with any designated professional groups of accountants 
and advisory groups described in paragraphs (3)(A) and (4) of sub-
section (a), and its pending issues agenda for future standard setting 
projects. 
SEC. 104. INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS. 
15 USC 7214. 
(a) IN GENERAL.—^The Board shall conduct a continuing pro-
gram of inspections to assess the degree of compliance of each 
registered public accounting firm and associated persons of that 
firm with this Act, the rules of the Board, the rules of the Commis-
sion, or professional standards, in connection with its performance 
of audits, issuance of audit reports, and related matters involving 
issuers. 
(b) INSPECTION FREQUENCY.— 
(1) IN GENERAL.—Subject to paragraph (2), inspections 
required by this section shall be conducted— 
(A) annually with respect to each registered public 
accounting firm that regularly provides audit reports for 
more than 100 issuers; and 
116 STAT. 758 
PUBLIC LAW 107-204-^ULY 30, 2002 
(B) not less frequently than once every 3 years with 
respect to each registered public accounting firm that regu-
larly provides audit reports for 100 or fewer issuers. 
(2) ADJUSTMENTS TO SCHEDULES.—^The Board may, by rule, 
adjust the inspection schedules set under paragraph (1) if the 
Board finds that different inspection schedules are consistent 
with the purposes of this Act, the public interest, and the 
protection of investors. The Board may conduct special inspec-
tions at the request of the Commission or upon its own motion. 
(c) PROCEDURES.—The Board shall, in each inspection under 
this section, and in accordance with its rules for such inspections— 
(1) identify any act or practice or omission to act by the 
registered public accounting firm, or by any associated person 
thereof, revealed by such inspection that may be in violation 
of this Act, the rules of the Board, the rules of the Commission, 
the firm's own quality control policies, or professional stand-
ards; 
(2) report any such act, practice, or omission, if appropriate, 
to the Commission and each appropriate State regulatory 
authority; and 
(3) begin a formal investigation or take disciplinary action, 
if appropriate, with respect to £my such violation, in accordance 
with this Act and the rules of the Board. 
(d) CONDUCT OF INSPECTIONS.—In conducting an inspection 
of a registered public accounting firm under this section, the Board 
shall— 
(1) inspect and review selected audit and review engage-
ments of the firm (which may include audit engagements that 
are the subject of ongoing litigation or other controversy 
between the firm and 1 or more third parties), performed at 
various offices and by various associated persons of the firm, 
as selected by the Board; 
(2) evaluate the sufficiency of the quality control system 
of the firm, and the manner of the documentation and commu-
nication of that system by the firm; and 
(3) perform such other testing of the audit, supervisory, 
and quality control procedures of the firm as are necessary 
or appropriate in light of the purpose of the inspection and 
the responsibilities of the Board. 
(e) RECORD RETENTION.—The rules of the Board may require 
the retention by registered public accounting firms for inspection 
purposes of records whose retention is not otherwise required by 
section 103 or the rules issued thereunder. 
if) PROCEDURES FOR REVIEW.—^The rules of the Board shall 
provide a procedure for the review of and response to a draft 
inspection report by the registered public accounting firm under 
inspection. The Board shall take such action with respect to such 
response as it considers appropriate (including revising the draft 
report or continuing or supplementing its inspection activities before 
issuing a final report), but the text of any such response, appro-
priately redacted to protect information reasonably identified by 
the accounting firm as confidential, shall be attached to and made 
part of the inspection report. 
(g) REPORT.—^A written report of the findings of the Board 
for each inspection under this section, subject to subsection (h), 
shall be— 
PUBLIC LAW 107-204-JULY 30, 2002 
116 STAT. 759 
(1) transmitted, in appropriate detail, to the Commission 
and each appropriate State regulatory authority, accompanied 
by any letter or comments by the Board or the inspector, 
and any letter of response from the registered public accounting 
firm; and 
(2) made available in appropriate detail to the public (sub-
ject to section 105(b)(5)(A), and to the protection of such con-
fidential and proprietary information as the Board may deter-
mine to be appropriate, or as may be required by law), except 
that no portions of the inspection report that deal with criti-
cisms of or potential defects in the quality control systems 
of the firm under inspection shall be made public if those 
criticisms or defects are addressed by the firm, to the satisfac-
tion of the Board, not later than 12 months after the date 
of the inspection report. 
(h) INTERIM COMMISSION REVIEW.— 
(1) REVIEWABLE MATTERS.—A registered public accounting 
firm may seek review by the Commission, pursuant to such 
rules as the Commission shall promulgate, if the firm— 
(A) has provided the Board with a response, pursuant 
to rules issued by the Board under subsection (f), to the 
substance of particular items in a draft inspection report, 
and disagrees with the assessments contained in any final 
report prepared by the Board following such response; or 
(B) disagrees with the determination of the Board that 
criticisms or defects identified in an inspection report have 
not been addressed to the satisfaction of the Board within 
12 months of the date of the inspection report, for purposes 
of subsection (g)(2). 
(2) TREATMENT OF REVIEW.—Any decision of the Commis-
sion with respect to a review under paragraph (1) shall not 
be reviewable under section 25 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78y), or deemed to be "final agency 
action" for purposes of section 704 of title 5, United States 
Code. 
(3) TIMING.—Review under paragraph (1) may be sought 
during the 30-day period following the date of the event giving 
rise to the review under subparagraph (A) or (B) of paragraph 
(1). 
SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS. 
15 USC 7215. 
(a) IN GENERAL.—The Board shall establish, by rule, subject Procedures. 
to the requirements of this section, fair procedures for the investiga-
tion and disciplining of registered public accounting firms and asso-
ciated persons of such firms. 
(b) INVESTIGATIONS.— 
(1) AUTHORITY.—In accordance with the rules of the Board, 
the Board may conduct an investigation of any act or practice, 
or omission to act, by a registered public accounting firm, 
any associated person of such firm, or both, that may violate 
any provision of this Act, the rules of the Board, the provisions 
of the securities laws relating to the preparation and issuance 
of audit reports and the obligations and liabilities of account-
ants with respect thereto, including the rules of the Commission 
issued under this Act, or professional standards, regardless 
of how the act, practice, or omission is brought to the attention 
of the Board. 
116 STAT. 760 
PUBLIC LAW 107-204—JULY 30, 2002 
Notification. 
(2) TESTIMONY AND DOCUMENT PRODUCTION.—In addition 
to such other actions as the Board determines to be necessary 
or appropriate, the rules of the Board may— 
(A) require the testimony of the firm or of any person 
associated with a registered pubUc accounting firm, with 
respect to any matter that the Board considers relevant 
or material to an investigation; 
(B) require the production of audit work papers and 
any other document or information in the possession of 
a registered public accounting firm or any associated person 
thereof, wherever domiciled, that the Board considers rel-
evant or material to the investigation, and may inspect 
the books and records of such firm or associated person 
to verify the accuracy of any documents or information 
supplied; 
(C) request the testimony of, and production of any 
document in the possession of, any other person, including 
any client of a registered public accounting firm that the 
Board considers relevant or material to an investigation 
under this section, with appropriate notice, subject to the 
needs of the investigation, as permitted under the rules 
of the Board; and 
(D) provide for procedures to seek issuance by the 
Commission, in a manner established by the Commission, 
of a subpoena to require the testimony of, and production 
of any document in the possession of, any person, including 
any client of a registered public accounting firm, that the 
Board considers relevant or material to an investigation 
under this section. 
(3) NONCOOPERATION WITH INVESTIGATIONS.— 
(A) IN GENERAL.—If a registered public accounting firm 
or any associated person thereof refuses to testify, produce 
documents, or otherwise cooperate with the Board in 
connection with an investigation under this section, the 
Board may— 
(i) suspend or bar such person from being associ-
ated with a registered public accounting firm, or 
require the registered public accounting firm to end 
such association; 
(ii) suspend or revoke the registration of the public 
accounting firm; and 
(iii) invoke such other lesser sanctions as the Board 
considers appropriate, and as specified by rule of the 
Board. 
(B) PROCEDURE.—^Any action taken by the Board under 
this paragraph shall be subject to the terms of section 
107(c). 
(4) COORDINATION AND REFERRAL OF INVESTIGATIONS.— 
(A) 
COORDINATION.—The Board 
shall 
notify 
the 
Commission of any pending Board investigation involving 
a potential violation of the securities laws, and thereafter 
coordinate its work with the work of the Commission's 
Division of Enforcement, as necessary to protect an ongoing 
Commission investigation. 
(B) REFERRAL.—The Board may refer an investigation 
under this section— 
(i) to the Commission; 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 761 
(ii) to any other Federal functional regulator (as 
defined in section 509 of the Gramm-Leach-Bliley Act 
(15 U.S.C. 6809)), in the case of an investigation that 
concerns an audit report for an institution that is 
subject to the jurisdiction of such regulator; and 
(iii) at the direction of the Commission, to— 
(I) the Attorney General of the United States; 
(II) the attorney general of 1 or more States; 
and 
(III) 
the 
appropriate 
State 
regulatory 
authority. 
(5) USE OF DOCUMENTS.— 
(A) CONFIDENTIALITY.—^Except as provided in subpara-
graph (B), all documents and information prepared or 
received by or specifically for the Board, and deliberations 
of the Board and its employees and agents, in connection 
with an inspection under section 104 or with an investiga-
tion under this section, shall be confidential and privileged 
as an evidentiary matter (and shall not be subject to civil 
discovery or other legal process) in any proceeding in any 
Federal or State court or administrative agency, and shall 
be exempt from disclosure, in the hands of an agency 
or establishment of the Federal Government, under the 
Freedom of Information Act (5 U.S.C. 552a), or otherwise, 
unless and until presented in connection with a public 
proceeding or released in accordance with subsection (c). 
(B) AVAILABILITY TO GOVERNMENT AGENCIES.—Without 
the loss of its status as confidential and privileged in 
the hands of the Board, all information referred to in 
subparagraph (A) may— 
(i) be made available to the Commission; and 
(ii) in the discretion of the Board, when determined 
by the Board to be necessary to accomplish the pur-
poses of this Act or to protect investors, be made avail-
able to— 
(I) the Attorney General of the United States; 
(II) the appropriate Federal functional regu-
lator (as defined in section 509 of the Gramm-
Leach-Bhley Act (15 U.S.C. 6809)), other than the 
Commission, with respect to an audit report for 
an institution subject to the jurisdiction of such 
regulator; 
(III) State attorneys general in connection with 
any criminal investigation; and 
(IV) 
any 
appropriate 
State 
regulatory 
authority, 
each of which shall maintain such information as confiden-
tial and privileged. 
(6) IMMUNITY.—^Any employee of the Board engaged in 
carrying out an investigation under this Act shall be immune 
from any civil liability arising out of such investigation in 
the same manner and to the same extent as an employee 
of the Federal Govemmient in similar circumstances. 
(c) DISCIPLINARY PROCEDURES.— 
(1) NOTIFICATION; RECORDKEEPING.—The rules of the Board 
shall provide that in any proceeding by the Board to determine 
116 STAT. 762 
PUBLIC LAW 107-204-^ULY 30, 2002 
whether a registered pubHc accounting firm, or an associated 
person thereof, should be disciphned, the Board shall— 
(A) bring specific charges with respect to the firm 
or associated person; 
(B) notify such firm or associated person of, and provide 
to the firm or associated person an opportunity to defend 
against, such charges; and 
(C) keep a record of the proceedings. 
(2) PUBLIC HEARINGS.—Hearings under this section shall 
not be public, unless otherwise ordered by the Board for good 
cause shown, with the consent of the parties to such hearing. 
(3) SUPPORTING STATEMENT.—^A determination by the Board 
to impose a sanction under this subsection shall be supported 
by a statement setting forth— 
(A) each act or practice in which the registered public 
accounting firm, or associated person, has engaged (or 
omitted to engage), or that forms a basis for all or a 
part of such sanction; 
(B) the specific provision of this Act, the securities 
laws, the rules of the Board, or professional standards 
which the Board determines has been violated; and 
(C) the sanction imposed, including a justification for 
that sanction. 
(4) SANCTIONS.—If the Board finds, based on all of the 
facts and circumstances, that a registered public accounting 
firm or associated person thereof has engaged in any act or 
practice, or omitted to act, in violation of this Act, the rules 
of the Board, the provisions of the securities laws relating 
to the preparation and issuance of audit reports and the obliga-
tions and liabilities of accountants with respect thereto, 
including the rules of the Commission issued under this Act, 
or professional standards, the Board may impose such discipli-
nary or remedial sanctions as it determines appropriate, subject 
to applicable limitations under paragraph (5), including— 
(A) temporary suspension or permanent revocation of 
registration under this title; 
(B) temporary or permanent suspension or bar of a 
person from further association with any registered public 
accounting firm; 
(C) temporary or permanent limitation on the activi-
ties, functions, or operations of such firm or person (other 
than in connection with required additional professional 
education or training); 
(D) a civil money penalty for each such violation, in 
an amount equal to— 
(i) not more than $100,000 for a natural person 
or $2,000,000 for any other person; and 
(ii) in any case to which paragraph (5) applies, 
not more than $750,000 for a natural person or 
$15,000,000 for any other person; 
(E) censure; 
(F) required additional professional 
education 
or 
training; or 
(G) any other appropriate sanction provided for in the 
rules of the Board. 
PUBLIC LAW 107-204—JULY 30, 2002 
116 STAT. 763 
(5) INTENTIONAL OR OTHER KNOWING CONDUCT.—The sanc-
tions and penalties described in subparagraphs (A) through 
(C) and (D)(ii) of paragraph (4) shall only apply to— 
(A) intentional or knowing conduct, including reckless 
conduct, that results in violation of the applicable statutory, 
regulatory, or professional standard; or 
(B) repeated instances of negligent conduct, each 
resulting in a violation of the applicable statutory, regu-
latory, or professional standard. 
(6) FAILURE TO SUPERVISE.— 
(A) IN GENERAL.—The Board may impose sanctions 
under this section on a registered accounting firm or upon 
the supervisory personnel of such firm, if the Board finds 
that— 
(i) the firm has failed reasonably to supervise an 
associated person, either as required by the rules of 
the Board relating to auditing or quality control stand-
ards, or otherwise, with a view to preventing violations 
of this Act, the rules of the Board, the provisions 
of the securities laws relating to the preparation and 
issuance of audit reports and the obligations and liabil-
ities of accountants with respect thereto, including the 
rules of the Commission under this Act, or professional 
standards; and 
(ii) such associated person commits a violation of 
this Act, or any of such rules, laws, or standards. 
(B) RULE OF CONSTRUCTION.—^No associated person of 
a registered public accounting firm shall be deemed to 
have failed reasonably to supervise any other person for 
purposes of subparagraph (A), if— 
(i) there have been established in and for that 
firm procedures, and a system for applying such proce-
dures, that comply with applicable rules of the Board 
and that would reasonably be expected to prevent and 
detect any such violation by such associated person; 
and 
(ii) such person has reasonably discharged the 
duties £ind obligations incumbent upon that person 
by reason of such procedures and system, and had 
no reasonable cause to believe that such procedures 
and system were not being complied with. 
(7) EFFECT OF SUSPENSION.— 
(A) ASSOCIATION WITH A PUBLIC ACCOUNTING FIRM.— 
It shall be unlawful for any person that is suspended 
or barred from being associated with a registered public 
accounting firm under this subsection willfiilly to become 
or remain associated with any registered public accounting 
firm, or for any registered public accounting firm that 
knew, or, in the exercise of reasonable care should have 
known, of the suspension or bar, to permit such an associa-
tion, without the consent of the Board or the Commission. 
(B) ASSOCIATION WITH AN ISSUER.—It shall be unlawful 
for any person that is suspended or barred from being 
associated with an issuer under this subsection willfully 
to become or remain associated with any issuer in an 
accountancy or a financial management capacity, and for 
any issuer that knew, or in the exercise of reasonable 
116 STAT. 764 
PUBLIC LAW 1 0 7 - 2 0 4 - J U L Y 30, 2002 
care should have known, of such suspension or bar, to 
permit such an association, without the consent of the 
Board or the Commission. 
(d) REPORTING OF SANCTIONS.— 
(1) RECIPIENTS.—If the Board imposes a disciplinary sanc-
tion, in accordance with this section, the Board shall report 
the sanction to— 
(A) the Commission; 
(B) any appropriate State regulatory authority or any 
foreign accountancy licensing board with which such firm 
or person is licensed or certified; and 
(C) the public (once any stay on the imposition of 
such sanction has been lifted). 
(2) CONTENTS.—The information reported under paragraph 
(1) shall include— 
(A) the name of the sanctioned person; 
(B) a description of the sanction and the basis for 
its imposition; and 
(C) such other information as the Board deems appro-
priate. 
(e) STAY OF SANCTIONS.— 
(1) IN GENERAL.—^Application to the Commission for review, 
or the institution by the Commission of review, of any discipli-
nary action of the Board shall operate as a stay of any such 
disciplinary action, unless and until the Commission orders 
(summarily 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) that 
no such stay shall continue to operate. 
(2) EXPEDITED PROCEDURES.—The Commission shall estab-
lish for appropriate cases an expedited procedure for consider-
ation and determination of the question of the duration of 
a stay pending review of any disciplinary action of the Board 
under this subsection. 
15 use 7216. 
SEC.106. FOREIGN PUBLIC ACCOUNTING FIRMS. 
(a) APPLICABILITY TO CERTAIN FOREIGN FIRMS.— 
(1) IN GENERAL.—Any foreign public accounting firm that 
prepares or furnishes an audit report with respect to any issuer, 
shall be subject to this Act and the rules of the Board and 
the Commission issued under this Act, in the same manner 
and to the same extent as a public accounting firm that is 
organized and operates under the laws of the United States 
or any State, except that registration pursuant to section 102 
shall not by itself provide a basis for subjecting such a foreign 
public accounting firm to the jurisdiction of the Federal or 
State courts, other than with respect to controversies between 
such firms and the Board. 
(2) BOARD AUTHORITY.—The Board may, by rule, determine 
that a foreign public accounting firm (or a class of such firms) 
that does not issue audit reports nonetheless plays such a 
substantial role in the preparation and furnishing of such 
reports for particular issuers, that it is necessary or appro-
priate, in light of the purposes of this Act and in the public 
interest or for the protection of investors, that such firm (or 
class of firms) should be treated as a public accounting firm 
PUBLIC LAW 107-204-JULY 30, 2002 
116 STAT. 765 
(or firms) for purposes of registration under, and oversight 
by the Board in accordance with, this title. 
(b) PRODUCTION OF AUDIT WORKPAPERS.— 
(1) CONSENT BY FOREIGN FIRMS.—If a foreign pubhc 
accounting firm issues an opinion or otherwise performs mate-
rial services upon which a registered public accounting firm 
relies in issuing all or part of any audit report or any opinion 
contained in an audit report, that foreign public accounting 
firm shall be deemed to have consented— 
(A) to produce its audit workpapers for the Board 
or the Commission in connection with any investigation 
by either body with respect to that audit report; and 
(B) to be subject to the jurisdiction of the courts of 
the United States for purposes of enforcement of any 
request for production of such workpapers. 
(2) CONSENT BY DOMESTIC FIRMS.—A registered public 
accounting firm that relies upon the opinion of a foreign public 
accounting firm, as described in paragraph (1), shall be 
deemed— 
(A) to have 
consented 
to 
supplying 
the 
audit 
workpapers of that foreign public accounting firm in 
response to a request for production by the Board or the 
Commission; and 
(B) to have secured the agreement of that foreign public 
accounting firm to such production, as a condition of its 
reliance on the opinion of that foreign public accounting 
firm. 
(c) EXEMPTION AUTHORITY.—The Commission, and the Board, 
subject to the approval of the Commission, may, by rule, regulation, 
or order, and as the Commission (or Board) determines necessary 
or appropriate in the public interest or for the protection of inves-
tors, either unconditionally or upon specified terms and conditions 
exempt any foreign public accounting firm, or any class of such 
firms, from any provision of this Act or the rules of the Board 
or the Commission issued under this Act. 
(d) DEFINITION.—In this section, the term "foreign public 
accounting firm" means a public accounting firm that is organized 
and operates under the laws of a foreign government or political 
subdivision thereof. 
SEC. 107. COMMISSION OVERSIGHT OF THE BOARD. 
15 USC 7217. 
(a) GENERAL OVERSIGHT RESPONSIBILITY.—The Commission 
shall have oversight and enforcement authority over the Board, 
as provided in this Act. The provisions of section 17(a)(1) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78q(a)(l)), and of section 
17(b)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(b)(l)) 
shall apply to the Board as fully as if the Board were a "registered 
securities association" for purposes of those sections 17(a)(1) and 
17(b)(1). 
(b) RULES OF THE BOARD.— 
(1) DEFINITION.—In this section, the term "proposed rule" 
means any proposed rule of the Board, and any modification 
of any such rule. 
(2) PRIOR APPROVAL REQUIRED.—No rule of the Board shall 
become effective without prior approval of the Commission in 
accordance with this section, other than as provided in section 
103(a)(3)(B) with respect to initial or transitional standards. 
116 STAT. 766 
PUBLIC LAW 107-204—JULY 30, 2002 
(3) APPROVAL CRITERIA.—The Commission shall approve 
a proposed rule, if it finds that the rule is consistent with 
the requirements of this Act and the securities laws, or is 
necessary or appropriate in the public interest or for the protec-
tion of investors. 
(4) PROPOSED RULE PROCEDURES.—^The provisions of para-
graphs (1) through (3) of section 19(b) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78s(b)) shall govern the pro-
posed rules of the Board, as fully as if the Board were a 
"registered securities association" for purposes of that section 
19(b), except that, for purposes of this paragraph— 
(A) the phrase "consistent with the requirements of 
this title and the rules and regulations 
thereunder 
applicable to such organization" in section 19(b)(2) of that 
Act shall be deemed to read "consistent with the require-
ments of title I of the Sarbanes-Oxley Act of 2002, and 
the rules and regulations issued thereunder applicable to 
such organization, or as necessary or appropriate in the 
public interest or for the protection of investors"; and 
(B) the phrase "otherwise in furtherance of the pur-
poses of this title" in section 19(b)(3)(C) of that Act shall 
be deemed to read "otherwise in furtherance of the purposes 
of title I of the Sarbanes-Oxley Act of 2002". 
(5) 
COMMISSION AUTHORITY TO AMEND RULES OF THE 
BOARD.—^The provisions of section 19(c) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78s(c)) shall govern the abroga-
tion, deletion, or addition to portions of the rules of the Board 
by the Commission as fully as if the Board were a "registered 
securities association" for purposes of that section 19(c), except 
that the phrase "to conform its rules to the requirements of 
this title and the rules and regulations thereunder applicable 
to such organization, or otherwise in furtherance of the pur-
poses of this title" in section 19(c) of that Act shall, for purposes 
of this paragraph, be deemed to read "to assure the fair 
administration of the Public Company Accounting Oversight 
Board, conform the rules promulgated by that Board to the 
requirements of title I of the Sarbanes-Oxley Act of 2002, 
or otherwise further the purposes of that Act, the securities 
laws, and the rules and regulations thereunder applicable to 
that Board". 
(c) COMMISSION REVIEW OF DISCIPLINARY ACTION TAKEN BY 
THE BOARD.— 
(1) NOTICE OF SANCTION.—The Board shall promptly file 
notice with the Commission of any final sanction on any reg-
istered public accounting firm or on any associated person 
thereof, in such form and containing such information as the 
Commission, by rule, may prescribe. 
(2) REVIEW OF SANCTIONS.—The provisions of sections 
19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934 
(15 U.S.C. 78s (d)(2) and (e)(1)) shall govern the review by 
the Commission of final disciplinary sanctions imposed by the 
Board (including sanctions imposed under section 105(b)(3) of 
this Act for noncooperation in an investigation of the Board), 
as fully as if the Board were a self-regulatory organization 
and the Commission were the appropriate regulatory agency 
for such organization for purposes of those sections 19(d)(2) 
and 19(e)(1), except that, for purposes of this paragraph— 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 767 
(A) section 105(e) of this Act (rather than that section 
19(d)(2)) shall govern the extent to which application for, 
or institution by the Commission on its own motion of, 
review of any disciplinary action of the Board operates 
as a stay of such action; 
(B) references in that section 19(e)(1) to "members" 
of such an organization shall be deemed to be references 
to registered public accounting firms; 
(C) the phrase "consistent with the purposes of this 
title" in that section 19(e)(1) shall be deemed to read "con-
sistent with the purposes of this title and title I of the 
Sarbanes-Oxley Act of 2002"; 
(D) references to rules of the Municipal Securities Rule-
making Board in that section 19(e)(1) shall not apply; and 
(E) the reference to section 19(e)(2) of the Securities 
Exchange Act of 1934 shall refer instead to section 107(c)(3) 
of this Act. 
(3) COMMISSION MODIFICATION AUTHORITY.—The Commis-
sion may enhance, modify, cancel, reduce, or require the remis-
sion of a sanction imposed by the Board upon a registered 
public accounting firm or associated person thereof, if the 
Commission, having due regard for the public interest and 
the protection of investors, finds, after a proceeding in accord-
ance with this subsection, that the sanction— 
(A) is not necessary or appropriate in furtherance of 
this Act or the securities laws; or 
(B) is excessive, oppressive, inadequate, or otherwise 
not appropriate to the finding or the basis on which the 
sanction was imposed. 
(d) CENSURE OF THE BOARD; OTHER SANCTIONS.— 
(1) RESCISSION OF BOARD AUTHORITY.—The Commission, 
by rule, consistent with the public interest, the protection of 
investors, and the other purposes of this Act and the securities 
laws, may relieve the Board of any responsibility to enforce 
compliance with any provision of this Act, the securities laws, 
the rules of the Board, or professional standards. 
(2) CENSURE OF THE BOARD; LIMITATIONS.—The Commission 
may, by order, as it determines 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, censure or impose limitations upon the activities, func-
tions, and operations of the Board, if the Commission finds, 
on the record, after notice and opportunity for a hearing, that 
the Board— 
(A) has violated or is unable to comply with any provi-
sion of this Act, the rules of the Board, or the securities 
laws; or 
(B) without reasonable justification or excuse, has 
failed to enforce compliance with any such provision or 
rule, or any professional standard by a registered public 
accounting firm or an associated person thereof. 
(3) CENSURE OF BOARD MEMBERS; REMOVAL FROM OFFICE.— 
The Commission may, as necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in further-
ance of the purposes of this Act or the securities laws, remove 
116 STAT. 768 
PUBLIC LAW 107-204-JULY 30, 2002 
from office or censure any member of the Board, if the Commis-
sion finds, on the record, after notice and opportunity for a 
hearing, that such member— 
(A) has willfully violated any provision of this Act, 
the rules of the Board, or the securities laws; 
(B) has willfully abused the authority of that member; 
or 
(C) without reasonable justification or excuse, has 
failed to enforce compliance with any such provision or 
rule, or any professional standard by any registered public 
accounting firm or any associated person thereof. 
15 use 7218. 
SEC. 108. ACCOUNTmG STANDARDS. 
(a) AMENDMENT TO SECURITIES ACT OF 1933.—Section 19 of 
the Securities Act of 1933 (15 U.S.C. 77s) is amended— 
(1) by redesignating subsections (b) and (c) as subsections 
(c) and (d), respectively; and 
(2) by inserting after subsection (a) the following: 
"(b) RECOGNITION OF ACCOUNTING STANDARDS.— 
"(1) IN GENERAL.—In carrying out its authority under sub-
section (a) and under section 13(b) of the Securities Exchange 
Act of 1934, the Commission may recognize, as 'generally 
accepted' for purposes of the securities laws, any accounting 
principles established by a standard setting body— 
"(A) t h a t -
'll) is organized as a private entity; 
"(ii) has, for administrative and operational pur-
poses, a board of trustees (or equivalent body) serving 
in the public interest, the majority of whom are not, 
concurrent with their service on such board, and have 
not been during the 2-year period preceding such 
service, associated persons of any registered public 
accounting firm; 
"(iii) is funded as provided in section 109 of the 
Sarbanes-Oxley Act of 2002; 
"(iv) has adopted procedures to ensure prompt 
consideration, by majority vote of its members, of 
changes to accounting principles necessary to reflect 
emerging accounting issues and changing business 
practices; and 
"(v) considers, in adopting accounting principles, 
the need to keep standards current in order to reflect 
changes in the business environment, the extent to 
which international 
convergence on high 
quality 
accounting standards is necessary or appropriate in 
the public interest and for the protection of investors; 
and 
"(B) that the Commission determines has the capacity 
to assist the Commission in fulfilling the requirements 
of subsection (a) and section 13(b) of the Securities 
Exchange Act of 1934, because, at a minimum, the standard 
setting body is capable of improving the accuracy and 
effectiveness of financial reporting and the protection of 
investors under the securities laws. 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 769 
"(2) ANNUAL REPORT.—^A standard setting body described 
in paragraph (1) shall submit an annual report to the Commis-
sion and the public, containing audited financial statements 
of that standard setting body.". 
(b) COMMISSION AUTHORITY.—The Commission shall promul- Regulations, 
gate such rules and regulations to carry out section 19(b) of the 
Securities Act of 1933, as added by this section, as it deems nec-
essary or appropriate in the public interest or for the protection 
of investors. 
(c) No EFFECT ON COMMISSION POWERS.—^Nothing in this Act, 
including this section and the amendment made by this section, 
shall be construed to impair or limit the authority of the Commis-
sion to establish accounting principles or standards for purposes 
of enforcement of the securities laws. 
(d) 
STUDY AND REPORT 
ON ADOPTING 
PRINCIPLES-BASED 
ACCOUNTING.— 
(1) STUDY.— 
(A) IN GENERAL.—^The Commission shall conduct a 
study on the adoption by the United States financial 
reporting system of a principles-based accounting system. 
(B) STUDY TOPICS.—^The study required by subpara-
graph (A) shall include an examination o
f
— 
(i) the extent to which principles-based accounting 
and financial reporting exists in the United States; 
(ii) the length of time required for change from 
a rules-based to a principles-based financial reporting 
system; 
(iii) the feasibility of and proposed methods by 
which a principles-based system may be implemented; 
and 
(iv) 
a 
thorough 
economic 
analysis 
of the 
implementation of a principles-based system. 
(2) REPORT.—^Not later than 1 year after the date of enact-
ment of this Act, the Commission shall submit a report on 
the results of the study required by paragraph (1) to the Com-
mittee on Banking, Housing, and Urban Affairs of the Senate 
and the Committee on Financial Services of the House of Rep-
resentatives. 
SEC. 109. FUNDING. 
15 USC 7219. 
(a) IN GENERAL.—The Board, and the standard setting body 
designated pursuant to section 19(b) of the Securities Act of 1933, 
as amended by section 108, shall he funded as provided in this 
section. 
(b) ANNUAL BUDGETS.—^The Board and the standard setting 
body referred to in subsection (a) shall each establish a budget 
for each fiscal year, which shall be reviewed and approved according 
to their respective internal procedures not less than 1 month prior 
to the commencement of the fiscal year to which the budget pertains 
(or at the beginning of the Board's first fiscal year, which may 
be a short fiscal year). The budget of the Board shall be subject 
to approval by the Commission. The budget for the first fiscal 
year of the Board shall be prepared and approved promptly fol-
lowing the appointment of the initial five Board members, to permit 
action by the Board of the organizational tasks contemplated by 
section 101(d). 
(c) SOURCES AND U S E S OF F U N D S . — 
116 STAT. 770 
PUBLIC LAW 107-204-^ULY 30, 2002 
(1) RECOVERABLE BUDGET EXPENSES.—The budget of the 
Board (reduced by any registration or annual fees received 
under section 102(e) for the year preceding the year for which 
the budget is being computed), and all of the budget of the 
standard setting body referred to in subsection (a), for each 
fiscal year of each of those 2 entities, shall be payable from 
annual accounting support fees, in accordance with subsections 
(d) and (e). Accounting support fees and other receipts of the 
Board and of such standard-setting body shall not be considered 
public monies of the United States. 
(2) FUNDS GENERATED FROM THE COLLECTION OF MONETARY 
PENALTIES.—Subject to the availability in advance in an appro-
priations Act, and notwithstanding subsection (i), all funds 
collected by the Board as a result of the assessment of monetary 
penalties shall be used to fund a merit scholarship program 
for undergraduate and graduate students enrolled in accredited 
accounting degree programs, which program is to be adminis-
tered by the Board or by an entity or agent identified by 
the Board. 
(d) ANNUAL ACCOUNTING SUPPORT FEE FOR THE BOARD.— 
(1) ESTABLISHMENT OF FEE.—^The Board shall establish, 
with the approval of the Commission, a reasonable annual 
accounting support fee (or a formula for the computation 
thereof), as may be necessary or appropriate to establish and 
maintain the Board. Such fee may also cover costs incurred 
in the Board's first fiscal year (which may be a short fiscal 
year), or may be levied separately with respect to such short 
fiscal year. 
(2) ASSESSMENTS.—The rules of the Board under paragraph 
(1) shall provide for the equitable allocation, assessment, and 
collection by the Board (or an agent appointed by the Board) 
of the fee established under paragraph (1), among issuers, 
in accordance with subsection (g), allowing for differentiation 
among classes of issuers, as appropriate. 
(e) ANNUAL ACCOUNTING SUPPORT FEE FOR STANDARD SETTING 
BODY.—^The annual accounting support fee for the standard setting 
body referred to in subsection (a)— 
(1) shall be allocated in accordance with subsection (g), 
and assessed and collected against each issuer, on behalf of 
the standard setting body, by 1 or more appropriate designated 
collection agents, as may be necessary or appropriate to pay 
for the budget and provide for the expenses of that standard 
setting body, and to provide for an independent, stable source 
of funding for such body, subject to review by the Commission; 
and 
(2) may differentiate among different classes of issuers. 
(f) LIMITATION ON FEE.—The amount of fees collected under 
this section for a fiscal year on behalf of the Board or the standards 
setting body, as the case may be, shall not exceed the recoverable 
budget expenses of the Board or body, respectively (which may 
include operating, capital, and accrued items), referred to in sub-
section (c)(1). 
(g) 
ALLOCATION OF ACCOUNTING 
SUPPORT 
FEES 
AMONG 
ISSUERS.—Any amount due from issuers (or a particular class of 
issuers) under this section to fund the budget of the Board or 
the standard setting body referred to in subsection (a) shall be 
allocated among and payable by each issuer (or each issuer in 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 771 
a particular class, as applicable) in an amount equal to the total 
of such amount, multiplied by a fraction— 
(1) the numerator of which is the average monthly equity 
market capitalization of the issuer for the 12-month period 
immediately preceding the beginning of the fiscal year to which 
such budget relates; and 
(2) the denominator of which is the average monthly equity 
market capitalization of all such issuers for such 12-month 
period. 
(h) CONFORMING AMENDMENTS.—Section 13(b)(2) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78m(b)(2)) is amended— 
(1) in subparagraph (A), by striking "and" at the end; 
and 
(2) in subparagraph (B), by striking the period at the 
end and inserting the following: "; and 
"(C) notwithstanding any other provision of law, pay the 
allocable share of such issuer of a reasonable annual accounting 
support fee or fees, determined in accordance with section 109 
of the Sarbanes-Oxley Act of 2002.". 
(i) RULE OF CONSTRUCTION.—Nothing in this section shall be 
construed to render either the Board, the standard setting body 
referred to in subsection (a), or both, subject to procedures in 
Congress to authorize or appropriate public funds, or to prevent 
such organization from utilizing additional sources of revenue for 
its activities, such as earnings from publication sales, provided 
that each additional source of revenue shall not jeopardize, in 
the judgment of the Commission, the actual and perceived independ-
ence of such organization. 
(j) START-UP EXPENSES OF THE BOARD.—^From the unexpended 
balances of the appropriations to the Commission for fiscal year 
2003, the Secretary of the Treasury is authorized to advance to 
the Board not to exceed the amount necessary to cover the expenses 
of the Board during its first fiscal year (which may be a short 
fiscal year). 
TITLE II—AUDITOR INDEPENDENCE 
SEC. 201. SERVICES OUTSIDE THE SCOPE OF PRACTICE OF AUDITORS. 
(a) PROHIBITED ACTIVITIES.—Section lOA of the Securities 
Exchange Act of 1934 (15 U.S.C. 78j-l) is amended by adding 
at the end the following: 
"(g) PROHIBITED ACTIVITIES.—Except as provided in subsection 
(h), it shall be unlawful for a registered public accounting firm 
(and any associated person of that firm, to the extent determined 
appropriate by the Commission) that performs for any issuer any 
audit required by this title or the rules of the Commission under 
this title or, beginning 180 days after the date of commencement 
of the operations of the Public Company Accounting Oversight 
Board established under section 101 of the Sarbanes-Oxley Act 
of 2002 (in this section referred to as the 'Board'), the rules of 
the Board, to provide to that issuer, contemporaneously with the 
audit, any non-audit service, including— 
"(1) bookkeeping or other services related to the accounting 
records or financial statements of the audit client; 
"(2) financial information systems design and implementa-
tion; 
^ 
116 STAT. 772 
PUBLIC LAW 107-204-^ULY 30, 2002 
"(3) appraisal or valuation services, fairness opinions, or 
contribution-in-kind reports; 
"(4) actuarial services; 
"(5) internal audit outsourcing services; 
"(6) management functions or human resources; 
"(7) broker or dealer, investment adviser, or investment 
banking services; 
"(8) legal services and expert services unrelated to the 
audit; and 
"(9) any other service that the Board determines, by regula-
tion, is impermissible. 
"(h) PREAPPROVAL REQUIRED FOR NON-AUDIT SERVICES.—A reg-
istered public accounting firm may engage in any non-audit service, 
including tax services, that is not described in any of paragraphs 
(1) through (9) of subsection (g) for an audit client, only if the 
activity is approved in advance by the audit committee of the 
issuer, in accordance with subsection (i).". 
15 use 7231. 
(b) EXEMPTION AUTHORITY.—^The Board may, on a case by 
case basis, exempt any person, issuer, public accounting firm, or 
transaction from the prohibition on the provision of services under 
section 10A(g) of the Securities Exchange Act of 1934 (as added 
by this section), to the extent that such exemption is necessary 
or appropriate in the public interest and is consistent with the 
protection of investors, and subject to review by the Commission 
in the same manner as for rules of the Board under section 107. 
SEC. 
202. 
PREAPPROVAL 
REQUIREMENTS. 
Section lOA of the Securities Exchange Act of 1934 (15 U.S.C. 
78J-1), as amended by this Act, is amended by adding at the 
end the following: 
"(i) PREAPPROVAL REQUIREMENTS.— 
"(1) IN GENERAL.— 
"(A) AUDIT COMMITTEE ACTION.^AII auditing services 
(which may entail providing comfort letters in connection 
with securities underwritings or statutory audits required 
for insurance companies for purposes of State law) and 
non-audit services, other than as provided in subparagraph 
(B), provided to an issuer by the auditor of the issuer 
shall be preapproved by the audit committee of the issuer. 
"(B) DE MINIMUS EXCEPTION.—The preapproval require-
ment under subparagraph (A) is waived with respect to 
the provision of non-audit services for an issuer, if— 
"(i) the aggregate amount of all such non-audit 
services provided to the issuer constitutes not more 
than 5 percent of the total amount of revenues paid 
by the issuer to its auditor during the fiscal year 
in which the nonaudit services are provided; 
"(ii) such services were not recognized by the issuer 
at the time of the engagement to be non-audit services; 
and 
"(iii) such services are promptly brought to the 
attention of the audit committee of the issuer and 
approved prior to the completion of the audit by the 
audit committee or by 1 or more members of the audit 
committee who are members of the board of directors 
to whom authority to grant such approvals has been 
delegated by the audit committee. 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 773 
"(2) DISCLOSURE TO INVESTORS.—Approval by an audit com-
mittee of an issuer under this subsection of a non-audit service 
to be performed by the auditor of the issuer shall be disclosed 
to investors in periodic reports required by section 13(a). 
"(3) DELEGATION AUTHORITY,—^The audit committee of an 
issuer may delegate to 1 or more designated members of the 
audit committee who are independent directors of the board 
of directors, the authority to grant preapprovals required by 
this subsection. The decisions of any member to whom authority 
is delegated under this paragraph to preapprove an activity 
under this subsection shall be presented to the full audit com-
mittee at each of its scheduled meetings. 
"(4) APPROVAL OF AUDIT SERVICES FOR OTHER PURPOSES.— 
In carrying out its duties under subsection (m)(2), if the audit 
committee of an issuer approves an audit service within the 
scope of the engagement of the auditor, such audit service 
shall be deemed to have been preapproved for purposes of 
this subsection.". 
SEC. 203. AUDIT PARTNER ROTATION. 
Section lOA of the Securities Exchange Act of 1934 (15 U.S.C. 
78J-1), as amended by this Act, is amended by adding at the 
end the following: 
"(j) AUDIT PARTNER ROTATION.—It shall be unlawful for a reg-
istered public accounting firm to provide audit services to an issuer 
if the lead (or coordinating) audit partner (having primary responsi-
bility for the audit), or the audit partner responsible for reviewing 
the audit, has performed audit services for that issuer in each 
of the 5 previous fiscal years of that issuer.". 
SEC. 204. AUDITOR REPORTS TO AUDIT COMMITTEES. 
Section lOA of the Securities Exchange Act of 1934 (15 U.S.C. 
78J-1), as amended by this Act, is amended by adding at the 
end the following: 
"(k) REPORTS TO AUDIT COMMITTEES.—^Each registered public 
accounting firm that performs for any issuer any audit required 
by this title shall timely report to the audit committee of the 
issuer— 
"(1) all critical accounting policies and practices to be used; 
"(2) all alternative treatments of financial information 
within generally accepted accounting principles that have been 
discussed with management officials of the issuer, ramifications 
of the use of such alternative disclosures and treatments, and 
the treatment preferred by the registered public accounting 
firm; and 
"(3) other material written communications between the 
registered public accounting firm and the management of the 
issuer, such as any management letter or schedule of 
unadjusted differences.". 
SEC. 205. CONFORMING AMENDMENTS. 
(a) DEFINITIONS.—Section 3(a) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end the 
following: 
"(58) AUDIT 
COMMITTEE.—The term 'audit committee' 
means— 
"(A) a committee (or equivalent body) established by 
and amongst the board of directors of an issuer for the 
116 STAT. 774 
PUBLIC LAW 107-204-^ULY 30, 2002 
purpose of overseeing the accounting and financial 
reporting processes of the issuer and audits of the financial 
statements of the issuer; and 
"(B) if no such committee exists with respect to an 
issuer, the entire board of directors of the issuer. 
"(59) REGISTERED PUBLIC ACCOUNTING FIRM.—The term 
'registered public accounting firm' has the same meaning as 
in section 2 of the Sarbanes-Oxley Act of 2002.". 
(b) AUDITOR REQUIREMENTS.—Section lOA of the Securities 
Exchange Act of 1934 (15 U.S.C. 78j-l) is amended— 
(1) by striking "an independent public accountant" each 
place that term appears and inserting "a registered public 
accounting firm"; 
(2) by striking "the independent public accountant" each 
place that term appears and inserting "the registered public 
accounting firm"; 
(3) in subsection (c), by striking "No independent public 
accountant" and inserting "No registered public accounting 
firm"; and 
(4) in subsection (b)— 
(A) by striking "the accountant" each place that term 
appears and inserting "the firm"; 
(B) by striking "such accountant" each place that term 
appears and inserting "such firm"; and 
(C) in paragraph (4), by striking "the accountant's 
report" and inserting "the report of the firm". 
(c) OTHER REFERENCES.—The Securities Exchange Act of 1934 
(15 U.S.C. 78a et seq.) is amended— 
(1) in section 12(b)(1) (15 U.S.C. 781(b)(1)), by striking 
"independent public accountants" each place that term appears 
and inserting "a registered public accounting firm"; and 
(2) in subsections (e) and (i) of section 17 (15 U.S.C. 78q), 
by striking "an independent public accountant" each place that 
term appears and inserting "a registered public accounting 
firm". 
(d) CONFORMING AMENDMENT.—Section 10A(f) of the Securities 
15 use 78J-1. 
Exchange Act of 1934 (15 U.S.C. 78k(f)) is amended— 
(1) by striking "DEFINITION" and inserting "DEFINITIONS"; 
and 
(2) by adding at the end the following: "As used in this 
section, the term 'issuer' means an issuer (as defined in section 
3), the securities of which are registered under section 12, 
or that is required to file reports pursuant to section 15(d), 
or that files or has filed a registration statement that has 
not yet become effective under the Securities Act of 1933 (15 
U.S.C. 77a et seq.), and that it has not withdrawn.". 
SEC. 206. CONFLICTS OF INTEREST. 
Section lOA of the Securities Exchange Act of 1934 (15 U.S.C. 
78J-1), as amended by this Act, is amended by adding at the 
end the following: 
"(1) CONFLICTS OF INTEREST.—It shall be unlawful for a reg-
istered public accounting firm to perform for an issuer any audit 
service required by this title, if a chief executive officer, controller, 
chief financial officer, chief accounting officer, or any person serving 
in an equivalent position for the issuer, was employed by that 
registered independent public accounting firm and participated in 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 775 
any capacity in the audit of that issuer during the 1-year period 
preceding the date of the initiation of the audit.". 
SEC. 207. STUDY OF MANDATORY ROTATION OF REGISTERED PUBLIC 15 USC 7232. 
ACCOUNTING FIRMS. 
(a) STUDY AND REVIEW REQUIRED.—The Comptroller General 
of the United States shall conduct a study and review of the 
potential effects of requiring the mandatory rotation of registered 
public accounting firms. 
(b) REPORT REQUIRED.—Not later than 1 year after the date Deadline. 
of enactment of this Act, the Comptroller General shall submit 
a report to the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee on Financial Services of the 
House of Representatives on the results of the study and review 
required by this section. 
(c) DEFINITION.—For purposes of this section, the term "manda-
tory rotation" refers to the imposition of a limit on the period 
of years in which a particular registered public accounting firm 
may be the auditor of record for a particular issuer. 
SEC. 208. COMMISSION AUTHORITY. 
15 USC 7233. 
(a) COMMISSION REGULATIONS.—Not later than 180 days after Deadline, 
the date of enactment of this Act, the Commission shall issue 
final regulations to carry out each of subsections (g) through (1) 
of section lOA of the Securities Exchange Act of 1934, as added 
by this title. 
(b) AUDITOR INDEPENDENCE.—It shall be unlawful for any reg-
istered public accounting firm (or an associated person thereof, 
as applicable) to prepare or issue any audit report with respect 
to any issuer, if the firm or associated person engages in any 
activity with respect to that issuer prohibited by any of subsections 
(g) through (1) of section lOA of the Securities Exchange Act of 
1934, as added by this title, or any rule or regulation of the 
Commission or of the Board issued thereunder. 
SEC. 209. CONSIDERATIONS BY APPROPRIATE STATE REGULATORY 
AUTHORITIES. 
In supervising nonregistered public accounting firms and their 
associated persons, appropriate State regulatory authorities should 
make an independent determination of the proper standards 
applicable, particularly taking into consideration the size and 
nature of the business of the accounting firms they supervise and 
the size and nature of the business of the clients of those firms. 
The standards applied by the Board under this Act should not 
be presumed to be applicable for purposes of this section for small 
and medium sized nonregistered public accounting firms. 
TITLE III—CORPORATE 
RESPONSIBILITY 
15 USC 7234. 
SEC. 301. PUBLIC COMPANY AUDIT COMMITTEES. 
Section lOA of the Securities Exchange Act of 1934 (15 U.S.C. 
78f) is amended by adding at the end the following: 
"(m) STANDARDS RELATING TO AUDIT COMMITTEES.— 
"(1) COMMISSION RULES.— 
15 use 7^-1. 
99-194 O - 03 - 26 : QL 3 Part I 
116 STAT. 776 
PUBLIC LAW 107-204-^ULY 30, 2002 
Deadline. 
"(A) IN GENERAL.—^Effective not later than 270 days 
after the date of enactment of this subsection, the Commis-
sion shall, by rule, direct the national securities exchanges 
and national securities associations to prohibit the listing 
of any security of an issuer that is not in compliance 
with the requirements of any portion of paragraphs (2) 
through (6). 
"(B) OPPORTUNITY TO CURE DEFECTS.—^The rules of the 
Commission under subparagraph (A) shall provide for 
appropriate procedures for an issuer to have an opportunity 
to cure any defects that wo;ild be the basis for a prohibition 
under subparagraph (A), before the imposition of such 
prohibition. 
"(2) 
RESPONSIBILITIES RELATING TO REGISTERED PUBLIC 
ACCOUNTING FIRMS.—^The audit committee of each issuer, in 
its capacity as a committee of the board of directors, shall 
be directly responsible for the appointment, compensation, and 
oversight of the work of any registered public accounting firm 
employed by that issuer (including resolution of disagreements 
between management and the auditor regarding financial 
reporting) for the purpose of preparing or issuing an audit 
report or related work, and each such registered public 
accounting firm shall report directly to the audit committee. 
"(3) INDEPENDENCE.— 
"(A) IN GENERAL.—^Each member of the audit com-
mittee of the issuer shall be a member of the board of 
directors of the issuer, and shall otherwise be independent. 
"(B) CRITERIA.—In order to be considered to be inde-
pendent for purposes of this paragraph, a member of an 
audit committee of an issuer may not, other than in his 
or her capacity as a member of the audit committee, the 
board of directors, or any other board committee— 
"(i) accept any consulting, advisory, or other 
compensatory fee from the issuer; or 
"(ii) be an affiliated person of the issuer or any 
subsidiary thereof. 
"(C) EXEMPTION AUTHORITY.—^The Commission may 
exempt from the requirements of subparagraph (B) a par-
ticular relationship with respect to audit committee mem-
bers, as the Commission determines appropriate in light 
of the circumstances. 
"(4) COMPLAINTS.—^Each audit committee shall establish 
procedures for— 
"(A) the receipt, retention, and treatment of complaints 
received by the issuer regarding accounting, internal 
accounting controls, or auditing matters; and 
"(B) the 
confidential, 
anonymous 
submission 
by 
employees of the issuer of concerns regarding questionable 
accounting or auditing matters. 
"(5) AUTHORITY TO ENGAGE ADVISERS.—^Each audit com-
mittee shall have the authority to engage independent counsel 
and other advisers, as it determines necessary to carry out 
its duties. 
"(6) FUNDING.—^Each issuer shall provide for appropriate 
funding, as determined by the audit committee, in its capacity 
as a committee of the board of directors, for payment of 
compensation— 
PUBLIC LAW 107-204-JULY 30, 2002 
116 STAT. 777 
"(A) to the registered public accounting firm employed 
by the issuer for the purpose of rendering or issuing an 
audit report; and 
"(B) to any advisers employed by the audit committee 
under paragraph (5).". 
SEC. 302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS. 
15 USC 7241. 
(a) REGULATIONS REQUIRED.—The Commission shall, by rule, 
require, for each company filing periodic reports under section 13(a) 
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m, 
78o(d)), that the principal executive officer or officers and the prin-
cipal financial officer or officers, or persons performing similar 
functions, certify in each annual or quarterly report filed or sub-
mitted under either such section of such Act that— 
(1) the signing officer has reviewed the report; 
(2) based on the officer's knowledge, the report does not 
contain any untrue statement of a material fact or omit to 
state a material fact necessary in order to make the statements 
made, in light of the circumstances under which such state-
ments were made, not misleading; 
(3) based on such officer's knowledge, the financial state-
ments, and other financial information included in the report, 
fairly present in all material respects the financial condition 
and results of operations of the issuer as of, and for, the 
periods presented in the report; 
(4) the signing officers— 
(A) are responsible for establishing and maintaining 
internal controls; 
(B) have designed such internal controls to ensure 
that material information relating to the issuer and its 
consolidated subsidiaries is made known to such officers 
by others within those entities, particularly during the 
period in which the pjeriodic reports are being prepared; 
(C) have evaluated the effectiveness of the issuer's 
internal controls as of a date within 90 days prior to 
the report; and 
(D) have presented in the report their conclusions 
about the effectiveness of their internal controls based on 
their evaluation as of that date; 
(5) the signing officers have disclosed to the issuer's audi-
tors and the audit committee of the board of directors (or 
persons fulfilling the equivalent function)— 
(A) all significant deficiencies in the design or operation 
of internal controls which could adversely affect the issuer's 
ability to record, process, summarize, and report financial 
data and have identified for the issuer's auditors any mate-
rial weaknesses in internal controls; and 
(B) any fraud, whether or not material, that involves 
management or other employees who have a significant 
role in the issuer's internal controls; and 
(6) the signing officers have indicated in the report whether 
or not there were significant changes in internal controls or 
in other factors that could significantly affect internal controls 
subsequent to the date of their evaluation, including any correc-
tive actions with regard to significant deficiencies and material 
weaknesses. 
116 STAT. 778 
PUBLIC LAW 107-204-^ULY 30, 2002 
(b) FOREIGN REINCORPORATIONS HAVE N O EFFECT.—Nothing 
in this section 302 shall be interpreted or applied in any way 
to allow any issuer to lessen the legal force of the statement 
required under this section 302, by an issuer having reincorporated 
or having engaged in any other transaction that resulted in the 
transfer of the corporate domicile or offices of the issuer from 
inside the United States to outside of the United States. 
(c) DEADLINE.—The rules required by subsection (a) shall be 
effective not later than 30 days after the date of enactment of 
this Act. 
15 use 7242. 
SEC. 303. IMPROPER INFLUENCE ON CONDUCT OF AUDITS. 
(a) RULES TO PROHIBIT.—It shall be unlawful, in contravention 
of such rules or regulations as the Commission shall prescribe 
as necessary and appropriate in the public interest or for the 
protection of investors, for any officer or director of an issuer, 
or any other person acting under the direction thereof, 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 that issuer 
for the purpose of rendering such financial statements materially 
misleading. 
(b) ENFORCEMENT.—In any civil proceeding, the Commission 
shall have exclusive authority to enforce this section and any rule 
or regulation issued under this section. 
(c) No PREEMPTION OF OTHER LAW.—The provisions of sub-
section (a) shall be in addition to, and shedl not supersede or 
preempt, any other provision of law or any rule or regulation 
issued thereunder. 
(d) DEADLINE FOR RULEMAKING.—The Commission shall— 
(1) propose the rules or regulations required by this section, 
not later than 90 days after the date of enactment of this 
Act; and 
(2) issue final rules or regulations required by this section, 
not later than 270 days after that date of enactment. 
15 use 7243. 
SEC. 304. FORFEITURE OF CERTAIN BONUSES AND PROFITS. 
(a) ADDITIONAL COMPENSATION PRIOR TO NONCOMPLLVNCE WITH 
COMMISSION FINANCIAL REPORTING REQUIREMENTS.—If an issuer 
is required to prepare an accounting restatement due to the material 
noncompliance of the issuer, as a result of misconduct, with any 
financial reporting requirement under the securities laws, the chief 
executive officer and chief financial officer of the issuer shall 
reimburse the issuer for— 
(1) any bonus or other incentive-based or equity-based com-
pensation received by that person from the issuer during the 
12-month period following the first public issuance or filing 
with the Commission (whichever first occurs) of the financial 
document embodying such financial reporting requirement; and 
(2) any profits realized from the sale of securities of the 
issuer during that 12-month period. 
(b) COMMISSION EXEMPTION AUTHORITY.—The Commission may 
exempt any person from the application of subsection (a), as it 
deems necessary and appropriate. 
SEC. 305. OFFICER AND DIRECTOR BARS AND PENALTIES. 
(a) UNFITNESS STANDARD.— 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 779 
(1) SECURITIES EXCHANGE ACT OF 1934.—Section 21(dX2) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(2)) 
is amended by striking "substantial unfitness" and inserting 
"unfitness". 
(2) SECURITIES ACT OF 1933.—Section 20(e) of the Securities 
Act of 1933 (15 U.S.C. 77t(e)) is amended by striking "substan-
tial unfitness" and inserting "unfitness". 
(b) 
EQUITABLE 
RELIEF.—Section 21(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u(d)) is amended by adding 
at the end the following: 
"(5) EQUITABLE RELIEF.—In any action or proceeding brought 
or instituted by the Commission under any provision of the securi-
ties laws, the Commission may seek, and any Federal court may 
grant, any equitable relief that may be appropriate or necessary 
for the benefit of investors.". 
SEC. 306. INSIDER TRADES DURING PENSION FUND BLACKOUT 
15USC7244. 
PERIODS. 
(a) PROHIBITION OF INSIDER I^RADING DURING PENSION FUND 
BLACKOUT PERIODS.— 
(1) IN GENERAL.—Except to the extent otherwise provided 
by rule of the Commission pursuant to paragraph (3), it shall 
be unlawful for any director or executive officer of an issuer 
of any equity security (other than £in exempted security), 
directly or indirectly, to purchase, sell, or otherwise acquire 
or transfer any equity security of the issuer (other than an 
exempted security) during any blackout period with respect 
to such equity security if such director or officer acquires such 
equity security in connection with his or her service or employ-
ment as a director or executive officer. 
(2) REMEDY.— 
(A) IN GENERAL.—^Any profit realized by a director 
or executive officer referred to in paragraph (1) from any 
purchase, sale, or other acquisition or transfer in violation 
of this subsection shall inure to and be recoverable by 
the issuer, irrespective of any intention on the part of 
such director or executive officer in entering into the trans-
action. 
(B) ACTIONS TO RECOVER PROFITS.—^An action to 
recover profits in accordance with this subsection may be 
instituted at law or in equity in any court of competent 
jurisdiction by the issuer, or by the owner of any security 
of the issuer in the name and in behalf of the issuer 
if the issuer fails or refuses to bring such action within 
60 days after the date of request, or fails diligently to 
prosecute the action thereafter, except that no such suit 
shall be brought more than 2 years after the date on 
which such profit was realized. 
(3) RULEMAKING AUTHORIZED.—The Commission shall, in 
consultation with the Secretary of Labor, issue rules to clarify 
the application of this subsection and to prevent evasion thereof. 
Such rules shall provide for the application of the requirements 
of paragraph (1) with respect to entities treated as a single 
employer with respect to an issuer under section 414(b), (c), 
(m), or (o) of the Internal Revenue Code of 1986 to the extent 
necessary to clarify the application of such requirements and 
to prevent evasion thereof Such rules may also provide for 
116 STAT. 780 
PUBLIC LAW 107-204-^ULY 30, 2002 
appropriate exceptions from the requirements of this sub-
section, including exceptions for purchases pursuant to an auto-
matic dividend reinvestment program or purchases or sales 
made pursuant to an advance election. 
(4) BLACKOUT PERIOD.—For purposes of this subsection, 
the term "blackout period", with respect to the equity securities 
of any issuer— 
(A) means any period of more than 3 consecutive busi-
ness days during which the ability of not fewer than 50 
percent of the participants or beneficiaries under all indi-
vidusJ account plans maintained by the issuer to purchase, 
sell, or otherwise acquire or transfer an interest in any 
equity of such issuer held in such an individual account 
plan is temporarily suspended by the issuer or by a fidu-
ciary of the plan; and 
(B) does not include, under regulations which shall 
be prescribed by the Commission— 
(i) a regularly scheduled period in which the 
participants and beneficiaries may not purchase, sell, 
or otherwise acquire or trsmsfer an interest in any 
equity of such issuer, if such period is— 
(I) incorporated into the individual account 
plan; and 
(II) timely disclosed to employees 
before 
becoming 
participants 
under 
the 
individual 
account plan or as a subsequent amendment to 
the plan; or 
(ii) any suspension described in subparagraph (A) 
that is imposed solely in connection with persons 
becoming participants or beneficiaries, or ceasing to 
be participants or beneficiaries, in an individual 
account plan by reason of a corporate merger, acquisi-
tion, divestiture, or similar transaction involving the 
plan or plan sponsor. 
(5) INDIVIDUAL ACCOUNT PLAN.—^For purposes of this sub-
section, the term "individual account plan" has the meaning 
provided in section 3(34) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002(34), except that such 
term shall not include a one-participant retirement plan (within 
the meaning of section 101(i)(8)(B) of such Act (29 U.S.C. 
1021(i)(8)(B))). 
(6) NOTICE TO DIRECTORS, EXECUTIVE OFFICERS, AND THE 
COMMISSION.—^In any case in which a director or executive 
officer is subject to the requirements of this subsection in 
connection with a blackout period (as defined in paragraph 
(4)) with respect to any equity securities, the issuer of such 
equity securities shall timely notify such director or officer 
and the Securities and Exchange Commission of such blackout 
period. 
(b) NOTICE REQUIREMENTS TO PARTICIPANTS AND BENEFICIARIES 
UNDER ERISA.— 
(1) IN GENERAL.—Section 101 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1021) is amended by 
redesignating the second subsection (h) as subsection (j), and 
by inserting after the first subsection (h) the following new 
subsection: 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 781 
"(i) NOTICE OF BLACKOUT PERIODS TO PARTICIPANT OR BENE-
FICIARY UNDER INDIVIDUAL ACCOUNT PLAN.— 
"(1) DUTIES OF PLAN ADMINISTRATOR.—In advance of 
the 
commencement of any blackout period with respect to an indi-
vidual account plan, the plan administrator shall notify the 
plan participants and beneficiaries who are affected by such 
action in accordance with this subsection. 
"(2) NOTICE REQUIREMENTS.— 
"(A) IN GENERAL.—^The notices described in paragraph 
(1) shall be written in a manner calculated to be understood 
by the average plan participant and shall include— 
"(i) the reasons for the blackout period, 
"(ii) an identification of the investments and other 
rights affected, 
"(iii) the expected beginning date and length of 
the blackout period, 
"(iv) in the case of investments affected, a state-
ment that the participant or beneficiary 
should 
evaluate the appropriateness of their current invest-
ment decisions in light of their inability to direct or 
diversify assets credited to their accounts during the 
blackout period, and 
"(v) such other matters as the Secretary may 
require by regulation. 
"(B) 
NOTICE TO PARTICIPANTS AND BENEFICL\RIES.— 
Except as otherwise provided in this subsection, notices 
described in paragraph (1) shall be furnished to all partici-
pants and beneficiaries under the plan to whom the black-
out period applies at least 30 days in advance of the black-
out period. 
"(C) EXCEPTION TO 30-DAY NOTICE REQUIREMENT.—^In 
any case in which— 
"(i) a deferral of the blackout period would violate 
the requirements of subparagraph (A) or (B) of section 
404(a)(1), and a fiduciary of the plan reasonably so 
determines in writing, or 
"(ii) the inability to provide the 30-day advance 
notice is due to events that were unforeseeable or 
circumstances beyond the reasonable control of the 
plan administrator, and a fiduciary of the plan reason-
ably so determines in writing, 
subparagraph (B) shall not apply, and the notice shall 
be furnished to all participants and beneficiaries under 
the plan to whom the blackout period applies as soon 
as reaisonably possible under the circumstances unless such 
a notice in advance of the termination of the blackout 
period is impracticable. 
"(D) WRITTEN NOTICE.—The notice required to be pro-
vided under this subsection shall be in writing, except 
that such notice may be in electronic or other form to 
the extent that such form is reasonably accessible to the 
recipient. 
"(E) NOTICE TO ISSUERS OF EMPLOYER SECURITIES SUB-
JECT TO BLACKOUT PERIOD.—In the case of any blackout 
period in connection with an individual account plan, the 
plan administrator shaU provide timely notice of such 
116 STAT. 782 
PUBLIC LAW 107-204-^ULY 30, 2002 
blackout period to the issuer of any employer securities 
subject to such blackout period. 
"(3) EXCEPTION FOR BLACKOUT PERIODS WITH LIMITED 
APPLICABILITY.—In any case in which the blackout period 
applies only to 1 or more participants or beneficiaries in connec-
tion with a merger, acquisition, divestiture, or similar trans-
action involving the plan or plan sponsor and occurs solely 
in connection with becoming or ceasing to be a participant 
or beneficiary under the plan by reason of such merger, acquisi-
tion, divestiture, or transaction, the requirement of this sub-
section that the notice be provided to all participants and 
beneficiaries shall be treated as met if the notice required 
under paragraph (1) is provided to such participants or bene-
ficiaries to whom the blackout period applies as soon as reason-
ably practicable. 
"(4) CHANGES IN LENGTH OF BLACKOUT PERIOD.—If, fol-
lowing the furnishing of the notice pursuant to this subsection, 
there is a change in the beginning date or length of the blackout 
period (specified in such notice pursuant to paragraph 
(2)(AXiii)), the administrator shall provide affected participants 
and beneficiaries notice of the change as soon as reasonably 
practicable. In relation to the extended blackout period, such 
notice shall meet the requirements of paragraph (2)(D) and 
shall specify any material change in the matters referred to 
in clauses (i) through (v) of paragraph (2)(A). 
"(5) REGULATORY EXCEPTIONS.—^The Secretary may provide 
by regulation for additional exceptions to the requirements 
of this subsection which the Secretary determines are in the 
interests of participants and beneficiaries. 
"(6) GUIDANCE AND MODEL NOTICES.—The Secretary shall 
issue guidance and model notices which meet the requirements 
of this subsection. 
"(7) BLACKOUT PERIOD.—^For purposes of this subsection— 
"(A) IN GENERAL.—^The term 'blackout period' means, 
in connection with an individual account plan, any period 
for which any ability of participants or beneficiaries under 
the plan, which is otherwise available under the terms 
of such plan, to direct or diversify assets credited to their 
accounts, to obtain loans from the plan, or to obtain dis-
tributions from the plan is temporarily suspended, limited, 
or restricted, if such suspension, limitation, or restriction 
is for any period of more than 3 consecutive business days. 
"(B) EXCLUSIONS.—The term ^blackout period' does not 
include a suspension, limitation, or restriction— 
"(i) which occurs by reason of the application of 
the securities laws (as defined in section 3(a)(47) of 
the Securities Exchange Act of 1934), 
"(ii) which is a change to the plan which provides 
for a regularly scheduled suspension, limitation, or 
restriction which is disclosed to participants or bene-
ficiaries through any summary of material modifica-
tions, any materials describing specific investment 
alternatives under the plan, or any changes thereto, 
or 
"(iii) which applies only to 1 or more individuals, 
each of whom is the participant, an alternate payee 
PUBLIC LAW 107-204—JULY 30, 2002 
116 STAT. 783 
(as defined in section 206(d)(3XK)), or any other bene-
ficiary pursuant to a qualified domestic relations order 
(as defined in section 206(d)(3)(B)(i)). 
"(8) INDIVIDUAL ACCOUNT PLAN.— 
"(A) IN GENERAL.—For purposes of this subsection, the 
term 'individual account plan' shall have the meaning pro-
vided such term in section 3(34), except that such term 
shall not include a one-participant retirement plan. 
"(B) ONE-PARTICIPANT RETIREMENT PLAN.—For pur-
poses of subparagraph (A), the term 'one-participant retire-
ment plan' means a retirement plan that— 
"(i) on the first day of the plan year— 
"(I) covered only the employer (and the 
employer's spouse) and the employer owned the 
entire business (whether or not incorporated), or 
"(II) covered only one or more partners (and 
their spouses) in a business partnership (including 
partners in an S or C corporation (as defined in 
section 1361(a) of the Internal Revenue Code of 
1986)), 
"(ii) meets the minimum coverage requirements 
of section 410(b) of the Internal Revenue Code of 1986 
(as in effect on the date of the enactment of this 
paragraph) without being combined with any other 
plan of the business that covers the employees of the 
business, 
"(iii) does not provide benefits to anyone except 
the employer (and the employer's spouse) or the part-
ners (and their spouses), 
"(iv) does not cover a business that is a member 
of an affiliated service group, a controlled group of 
corporations, or a group of businesses under common 
control, and 
"(v) does not cover a business that 
leases 
employees.". 
(2) ISSUANCE OF INITIAL GUIDANCE AND MODEL NOTICE.— Deadlines. 
The Secretary of Labor shall issue initial guidance and a model 
notice pursuant to section 101(i)(6) of the Employee Retirement 
Income Security Act of 1974 (as added by this subsection) 
not later than January 1, 2003. Not later than 75 days after Regulations. 
the date of the enactment of this Act, the Secretary shall 
promulgate interim final rules necessary to carry out the 
amendments made by this subsection. 
(3) CIVIL PENALTIES FOR FAILURE TO PROVIDE NOTICE.— 
Section 502 of such Act (29 U.S.C. 1132) is amended— 
(A) in subsection (a)(6), by striking "(5), or (6)" and 
inserting "(5), (6), or (7)"; 
(B) by redesignating paragraph (7) of subsection (c) 
as paragraph (8); and 
(C) by inserting after paragraph (6) of subsection (c) 
the following new paragraph: 
"(7) The Secretary may assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan adminis-
trator's failure or refusal to provide notice to participants and 
beneficiaries in accordance with section lOl(i). For purposes of 
this paragraph, each violation with respect to any single participant 
or beneficiary shall be treated as a separate violation.". 
116 STAT. 784 
PUBLIC LAW 107-204r-JULY 30, 2002 
(3) PLAN AMENDMENTS.—^If any amendment made by this 
subsection requires an amendment to any plan, such plan 
amendment shall not be required to be made before the first 
plan year beginning on or after the effective date of this section, 
if— 
(A) during the period after such amendment made 
by this subsection t ^ e s effect and before such first plan 
year, the plan is operated in good faith compliance with 
the requirements of such amendment made by this sub-
section, and 
(B) such plan amendment applies retroactively to the 
period after such amendment made by this subsection takes 
effect and before such first plan year. 
(c) EFFECTIVE DATE.—^The provisions of this section (including 
the amendments made thereby) shall take effect 180 days after 
the date of the enactment of this Act. Good faith compliance with 
the requirements of such provisions in advance of the issuance 
of applicable regulations thereunder shall be treated as compliance 
with such provisions. 
15 use 7245. 
SEC. 307. RULES OF PROFESSIONAL RESPONSffilLITY FOR ATTORNEYS. 
Deadline. 
Not later than 180 days after the date of enactment of this 
Act, the Commission shall issue rules, in the public interest and 
for the protection of investors, setting forth minimum standards 
of professional conduct for attorneys appearing and practicing before 
the Commission in any way in the representation of issuers, 
including a rule— 
(1) requiring an attorney to report evidence of a material 
violation of securities law or breach of fiduciary duty or similar 
violation by the company or any agent thereof, to the chief 
legal counsel or the chief executive officer of the company 
(or the equivalent thereof); and 
(2) if the counsel or officer does not appropriately respond 
to the evidence (adopting, as necessary, appropriate remedial 
measures or sanctions with respect to the violation), requiring 
the attorney to report the evidence to the audit committee 
of the board of directors of the issuer or to another committee 
of the board of directors comprised solely of directors not 
employed directly or indirectly by the issuer, or to the board 
of directors. 
15 use 7246. 
SEC. 308. FAIR FUNDS FOR INVESTORS. 
(a) CIVIL PENALTIES ADDED TO DISGORGEMENT FUNDS FOR THE 
RELIEF OF VICTIMS.—^If in any judicial or administrative action 
brought by the Commission under the securities laws (as such 
term is defined in section 3(a)(47) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78c(a)(47)) the Commission obtains an order 
requiring disgorgement against any person for a violation of such 
laws or the rules or regulations thereunder, or such person agrees 
in settlement of any such action to such disgorgement, and the 
Commission also obtains pursuant to such laws a civil penalty 
against such person, the amount of such civil penalty shall, on 
the motion or at the direction of the Commission, be added to 
and become part of the disgorgement fund for the benefit of the 
victims of such violation. 
(b) 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 
PUBLIC LAW 107-204-JULY 30, 2002 
116 STAT. 785 
States for a disgorgement fund described in subsection (a). Such 
gifts, bequests, and devises of money and proceeds from sales of 
other property received as gifts, bequests, or devises shall be depos-
ited in the disgorgement fund and shall be available for allocation 
in accordance with subsection (a). 
(c) STUDY REQUIRED.— 
(1) SUBJECT OF STUDY.—^The Commission shall review and 
analyze— 
(A) enforcement actions by the Commission over the 
five years preceding the date of the enactment of this 
Act that have included proceedings to obtain civil penalties 
or disgorgements to identify areas where such proceedings 
may be utilized to efficiently, effectively, and fairly provide 
restitution for injured investors; and 
(B) other methods to more efficiently, effectively, and 
fairly provide restitution to injured investors, including 
methods to improve the collection rates for civil penalties 
and disgorgements. 
(2) REPORT REQUIRED.—^The Commission shall report its Deadline, 
findings to the Committee on Financial Services of the House 
of Representatives and the Committee on Banking, Housing, 
and Urban Affairs of the Senate within 180 days after of 
the date of the enactment of this Act, and shall use such 
findings to revise its rules and regulations as necessary. The 
report shall include a discussion of regulatory or legislative 
actions that are recommended or that may be necessary to 
address concerns identified in the study. 
(d) CONFORMING AMENDMENTS.—Each of the following provi-
sions is amended by inserting ", except as otherwise provided in 
section 308 of the Sarbanes-Oxley Act of 2002" after "Treasury 
of the United States": 
(1) Section 21(d)(3)(CXi) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78u(d)(3)(C)(i)). 
(2) Section 21A(d)(l) of such Act (15 U.S.C. 78u-l(dXl)). 
(3) Section 20(d)(3)(A) of the Securities Act of 1933 (15 
U.S.C. 77t(d)(3)(A)). 
(4) Section 42(eX3)(A) of the Investment Company Act of 
1940 (15 U.S.C. 80a-41(eX3)(A)). 
(5) Section 209(e)(3XA) of the Investment Advisers Act 
of 1940 (15 U.S.C. 80b-9(eX3)(A)). 
(e) 
DEFINITION.—^As 
used 
in 
this 
section, 
the 
term 
"disgorgement fund" means a fund established in any administra-
tive or judicial proceeding described in subsection (a). 
TITLE IV—ENHANCED FINANCIAL 
DISCLOSURES 
SEC. 401. DISCLOSURES IN PERIODIC REPORTS. 
15 USC 7261. 
(a) DISCLOSURES REQUIRED.—Section 13 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at 
the end the following: 
"(i) ACCURACY OF FINANCIAL REPORTS.—^Each financial report 
that contains financial statements, and that is required to be pre-
pared in accordance with (or reconciled to) generally accepted 
accounting principles under this title and filed with the Commission 
shall reflect all material correcting adjustments that have been 
116 STAT. 786 
PUBLIC LAW 107-204-JULY 30, 2002 
identified by a registered public accounting firm in accordance 
with generally accepted accounting principles and the rules and 
regulations of the Commission. 
DeadUne. 
"0") O F F - B A L A N C E 
S H E E T TRANSACTIONS.—Not l a t e r t h a n 
180 
Regulations. 
days after the date of enactment of the Sarbanes-Oxley Act of 
2002, the Commission shall issue final rules providing that each 
annual and quarterly financial report required to be filed with 
the Commission shall disclose all material off-balance sheet trans-
actions, arrangements, obligations (including contingent obliga-
tions), and other relationships of the issuer with unconsolidated 
entities or other persons, that may have a material current or 
future effect on financial condition, changes in financial condition, 
results of operations, liquidity, capital expenditures, 
capital 
resources, or significant components of revenues or expenses.". 
Deadline. 
(b) COMMISSION RULES ON PRO FORMA FIGURES.—^Not l a t e r 
than 180 days after the date of enactment of the Sarbanes-Oxley 
Act fo 2002, the Commission shall issue final rules providing that 
pro forma financial information included in any periodic or other 
report filed with the Commission pursuant to the securities laws, 
or in any public disclosure or press or other release, shall be 
presented in a manner that— 
(1) does not contain an untrue statement of a material 
fact or omit to state a material fact necessary in order to 
make the pro forma financial information, in light of the cir-
cumstances under which it is presented, not misleading; and 
(2) reconciles it with the financial condition and results 
of operations of the issuer under generally accepted accounting 
principles. 
(c) STUDY AND REPORT ON SPECIAL PURPOSE ENTITIES.— 
DeadUne. 
(1) STUDY REQUIRED.—^The Commission shall, not later 
than 1 year after the effective date of adoption of off-balance 
sheet disclosure rules required by section 13(j) of the Securities 
Exchange Act of 1934, as added by this section, complete a 
study of filings by issuers and their disclosures to determine— 
(A) the extent of off-balance 
sheet transactions, 
including assets, liabilities, leases, losses, and the use of 
special purpose entities; and 
(B) whether generally accepted accounting rules result 
in financial statements of issuers reflecting the economics 
of such off-balance sheet transactions to investors in a 
transparent fashion. 
Deadline. 
(2) REPORT AND RECOMMENDATIONS.—^Not l a t e r t h a n 
6 
months after the date of completion of the study required 
by paragraph (1), the Commission shall submit a report to 
the President, the Committee on Banking, Housing, and Urban 
Affairs of the Senate, and the Committee on Financial Services 
of the House of Representatives, setting forth— 
(A) the amount or an estimate of the amount of off-
balance sheet transactions, including assets, liabilities, 
leases, and losses of, and the use of special purpose entities 
by, issuers filing periodic reports pursuant to section 13 
or 15 of the Securities Exchange Act of 1934; 
(B) the extent to which special purpose entities are 
used to facilitate off-balance sheet transactions; 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 787 
(C) whether generally accepted accounting principles 
or the rules of the Commission result in financial state-
ments of issuers reflecting the economics of such trans-
actions to investors in a transparent fashion; 
(D) whether generally accepted accounting principles 
specifically result in the consolidation of special purpose 
entities sponsored by an issuer in cases in which the issuer 
has the majority of the risks and rewards of the special 
purpose entity; and 
(E) any recommendations of the Commission for 
improving the transparency and quality of reporting off-
balance sheet transactions in the financial statements and 
disclosures required to be filed by an issuer with the 
Commission. 
SEC. 402. ENHANCED CONFLICT OF BMTEREST PROVISIONS. 
(a) PROHIBITION ON PERSONAL LOANS TO EXECUTIVES.—Section 
13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m), as 
amended by this Act, is amended by adding at the end the following: 
"(k) PROHIBITION ON PERSONAL LOANS TO EXECUTIVES.— 
"(1) IN GENERAL.—^It shall be unlawful for any issuer (as 
defined in section 2 of the Sarbanes-Oxley Act of 2002), directly 
or indirectly, including through any subsidiary, to extend or 
maintain credit, to arrange for the extension of credit, or to 
renew an extension of credit, in the form of a personal loan 
to or for any director or executive officer (or equivalent thereof) 
of that issuer. An extension of credit maintained by the issuer 
on the date of enactment of this subsection shall not be subject 
to the provisions of this subsection, provided that there is 
no material modification to any term of any such extension 
of credit or any renewal of any such extension of credit on 
or after that date of enactment. 
"(2) LIMITATION.—^Paragraph (1) does not preclude any 
home improvement and manufactured home loans (as that term 
is defined in section 5 of the Home Owners' Loan Act (12 
U.S.C. 1464)), consumer credit (as defined in section 103 of 
the Truth in Lending Act (15 U.S.C. 1602)), or any extension 
of credit under an open end credit plan (as defined in section 
103 of the Truth in Lending Act (15 U.S.C. 1602)), or a charge 
card (as defined in section 127(c)(4)(e) of the Truth in Lending 
Act (15 U.S.C. 1637(c)(4Xe)), or any extension of credit by 
a broker or dealer registered under section 15 of this title 
to an employee of that broker or dealer to buy, trade, or 
carry securities, that is permitted under rules or regulations 
of the Board of Governors of the Federal Reserve System pursu-
ant to section 7 of this title (other than an extension of credit 
that would be used to purchase the stock of that issuer), that 
is— 
"(A) made or provided in the ordinary course of the 
consumer credit business of such issuer; 
"(B) of a type that is generally made available by 
such issuer to the public; and 
"(C) made by such issuer on market terms, or terms 
that are no more favorable than those offered by the issuer 
to the general public for such extensions of credit. 
"(3) RULE OF CONSTRUCTION FOR CERTAIN LOANS.—^Para-
graph (1) does not apply to any loan made or maintained 
116 STAT. 788 
PUBLIC LAW 107-204-^ULY 30, 2002 
by an insured depository institution (as defined in section 3 
of the Federal Deposit Insurance Act (12 U.S.C. 1813)), if 
the loan is subject to the insider lending restrictions of section 
22(h) of the Federal Reserve Act (12 U.S.C. 375b).". 
SEC. 403. DISCLOSURES OF TRANSACTIONS INVOLVING MANAGEMENT 
AND PRINCIPAL STOCKHOLDERS. 
(a) AMENDMENT.—Section 16 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78p) is amended by striking the heading of 
such section and subsection (a) and inserting the following: 
"SEC. 16. DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS. 
"(a) DISCLOSURES REQUIRED.— 
"(1) DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS 
REQUIRED TO FILE.—Every person 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 pursuant to section 12, or who is a director or 
an officer of the issuer of such security, shall file the statements 
required by this subsection with the Commission (and, if such 
security is registered on a national securities exchange, also 
with the exchange). 
"(2) TIME OF FILING.—The statements required by this sub-
section shall be filed— 
"(A) at the time of the registration of such security 
on a national securities exchange or by the effective date 
of a registration statement filed pursuant to section 12(g); 
"(B) within 10 days after he or she becomes such 
beneficial owner, director, or officer; 
"(C) if there has been a change in such ownership, 
or if such person shall have purchased or sold a security-
based swap agreement (as defined in section 206(b) of 
the Gramm-Leach-Bliley Act (15 U.S.C. 78c note)) involving 
such equity security, before the end of the second business 
day following the day on which the subject transaction 
has been executed, or at such other time as the Commission 
shall establish, by rule, in any case in which the Commis-
sion determines that such 2-day period is not feasible. 
"(3) CONTENTS OF STATEMENTS.—A statement filed— 
"(A) under subparagraph (A) or (B) of paragraph (2) 
shall contain a statement of the amount of all equity securi-
ties of such issuer of which the filing person is the beneficial 
owner; and 
"(B) under subparagraph (C) of such paragraph shall 
indicate ownership by the filing person at the date of 
filing, any such changes in such ownership, and such pur-
chases and sales of the security-based swap agreements 
as have occurred since the most recent such filing under 
such subparagraph. 
Deadline. 
"(4) ELECTRONIC FILING AND AVAILABILITY.—Beginning n o t 
later than 1 year after the date of enactment of the Sarbanes-
OxleyActof2002— 
"(A) a statement filed under subparagraph (C) of para-
graph (2) shall be filed electronically; 
Deadline. 
"(B) the Commission shall provide each such statement 
on a publicly accessible Internet site not later than the 
end of the business day following that filing; and 
PUBLIC LAW 107-204—JULY 30, 2002 
116 STAT. 789 
"(C) the issuer (if the issuer maintains a corporate Deadline, 
website) shall provide that statement on that corporate 
website, not later than the end of the business day following 
that filing.", 
(b) EFFECTIVE DATE.—^The amendment made by this section 
15 use 78p note, 
shall be effective 30 days after the date of the enactment of this 
Act. 
SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS. 
15 USC 7262. 
(a) RULES REQUIRED.—The Commission shall prescribe rules 
requiring each annual report required by section 13(a) or 15(d) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) 
to contain an internal control report, which shall— 
(1) state the responsibility of management for establishing 
and maintaining an adequate internal control structure and 
procedures for financial reporting; and 
(2) contain an assessment, as of the end of the most recent 
fiscal year of the issuer, of the effectiveness of the internal 
control structure and procedures of the issuer for 
financial 
reporting. 
(b) 
INTERNAL CONTROL EVALUATION AND REPORTING.—With 
respect to the internal control assessment required by subsection 
(a), each registered public accounting firm that prepares or issues 
the audit report for the issuer shall.attest to, and report on, the 
assessment made by the management of the issuer. An attestation 
made under this subsection shall be made in accordance with stand-
ards for attestation engagements issued or adopted by the Board. 
Any such attestation shall not be the subject of a separate engage-
ment. 
SEC. 405. EXEMPTION. 
15 USC 7263. 
Nothing in section 401, 402, or 404, the amendments made 
by those sections, or the rules of the Commission under those 
sections shall apply to any investment company registered under 
section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-
8). 
SEC. 406. CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS. 
15 USC 7264. 
(a) CODE OF ETHICS DISCLOSURE.—^The Commission shall issue Regulations, 
rules to require each issuer, together with periodic reports required 
pursuant to section 13(a) or 15(d) of the Securities Exchange Act 
of 1934, to disclose whether or not, and if not, the reason therefor, 
such issuer has adopted a code of ethics for senior financial officers, 
applicable to its principal financial officer and comptroller or prin-
cipal accounting officer, or persons performing similar functions. 
(b) CHANGES IN CODES OF ETHICS.—^The Commission shall Regulations. 
revise its regulations concerning matters requiring prompt disclo-
sure on Form 8-K (or any successor thereto) to require the imme-
diate disclosure, by means of the filing of such form, dissemination 
by the Internet or by other electronic means, by any issuer of 
any change in or waiver of the code of ethics for senior financial 
officers. 
(c) DEFINITION.—In this section, the term "code of ethics" means 
such standards as are reasonably necessary to promote— 
(1) honest and ethical conduct, including the ethical han-
dling of actual or apparent conflicts of interest between personal 
and professional relationships; 
116 STAT. 790 
PUBLIC LAW 107-204—JULY 30, 2002 
(2) full, fair, accurate, timely, and understandable disclo-
sure in the periodic reports required to be filed by the issuer; 
and 
(3) compliance with applicable governmental rules and 
regulations. 
(d) DEADLINE FOR RULEMAKING.—^The Commission shall— 
(1) propose rules to implement this section, not later than 
90 days after the date of enactment of this Act; and 
(2) issue final rules to implement this section, not later 
than 180 days after that date of enactment. 
15 use 7265. 
SEC. 407. DISCLOSURE OF AUDIT COMMITTEE FINANCIAL EXPERT. 
(a) RULES DEFINING "FINANCIAL EXPERT".—The Commission 
shall issue rules, as necessary or appropriate in the public interest 
and consistent with the protection of investors, to require each 
issuer, together with periodic reports required pursuant to sections 
13(a) and 15(d) of the Securities Exchange Act of 1934, to disclose 
whether or not, and if not, the reasons therefor, the audit committee 
of that issuer is comprised of at least 1 member who is a financial 
expert, as such term is defined by the Commission. 
(b) CONSIDERATIONS.—In defining the term "financial expert" 
for purposes of subsection (a), the Commission shall consider 
whether a person has, through education and experience as a public 
accountant or auditor or a principal financial officer, comptroller, 
or principal accounting officer of an issuer, or from a position 
involving the performance of similar functions— 
(1) an understanding of generally accepted accounting prin-
ciples and financial statements; 
(2) experience in— 
(A) the preparation or auditing of financial statements 
of generally comparable issuers; and 
(B) the application of such principles in connection 
with the accounting for estimates, accruals, and reserves; 
(3) experience with internal accounting controls; and 
(4) an understanding of audit committee functions. 
(c) DEADLINE FOR RULEMAKING.—The Commission shall— 
(1) propose rules to implement this section, not later than 
90 days after the date of enactment of this Act; and 
(2) issue final rules to implement this section, not later 
than 180 days after that date of enactment. 
15 use 7266. 
SEC. 408. ENHANCED REVIEW OF PERIODIC DISCLOSURES BY ISSUERS. 
(a) REGULAR AND SYSTEMATIC REVIEW.—^The Commission shall 
review disclosures made by issuers reporting under section 13(a) 
of the Securities Exchange Act of 1934 (including reports filed 
on Form 10-K), and which have a class of securities listed on 
a national securities exchange or traded on an automated quotation 
facility of a national securities association, on a reg^ilar and system-
atic basis for the protection of investors. Such review shall include 
a review of an issuer's financial statement. 
(b) REVIEW CRITERIA.—^For purposes of scheduling the reviews 
required by subsection (a), the Commission shall consider, among 
other factors— 
(1) issuers that have issued material restatements of finan-
cial results; 
(2) issuers that experience significant volatility in their 
stock price as compared to other issuers; 
(3) issuers with the largest market capitalization; 
PUBLIC LAW 107-204—JULY 30, 2002 
116 STAT. 791 
(4) emerging companies with disparities in price to earning 
ratios; 
(5) issuers whose operations significantly affect any mate-
rial sector of the economy; and 
(6) any other factors that the Commission may consider 
relevant. 
(c) MINIMUM REVIEW PERIOD.—In no event shall an issuer 
required to file reports under section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 be reviewed under this section less frequently 
than once every 3 years. 
SEC. 409. REAL TIME ISSUER DISCLOSURES. 
Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 
78m), as amended by this Act, is amended by adding at the end 
the following: 
"(1) REAL TIME ISSUER DISCLOSURES.—^Each issuer reporting 
under section 13(a) or 15(d) shall disclose to the public on a rapid 
and current basis such additional information concerning material 
changes in the financial condition or operations of the issuer, in 
plain English, which may include trend and qualitative information 
Eind graphic presentations, as the Commission determines, by rule, 
is necessary or usefiil for the protection of investors and in the 
public interest.". 
TITLE V—ANALYST CONFLICTS OF 
INTEREST 
SEC. 501. TREATMENT OF SECURITIES ANALYSTS BY REGISTERED 
SECURITIES ASSOCIATIONS AND NATIONAL SECURITIES 
EXCHANGES. 
(a) RULES REGARDING SECURITIES ANALYSTS.—^The Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by 
inserting after section 15C the following new section: 
"SEC. 15D. SECURITIES ANALYSTS AND RESEARCH REPORTS. 
15 USC 78o-6. 
"(a) ANALYST PROTECTIONS.—^The Commission, or upon the Deadline, 
authorization and direction of the Commission, a registered securi-
ties association or national securities exchange, shall have adopted, 
not later than 1 year after the date of enactment of this section, 
rules reasonably designed to address conflicts of interest that can 
arise when securities analysts recommend equity securities in 
research reports and public appearances, in order to improve the 
objectivity of research and provide investors with more useful and 
reliable information, including rules designed— 
"(1) to foster greater public confidence in securities 
research, and to protect the objectivity and independence of 
securities analysts, by— 
"(A) 
restricting 
the prepublication 
clearance or 
approval of research reports by persons employed by the 
broker or dealer who are engaged in investment banking 
activities, or persons not directly responsible for investment 
research, other than legal or compliance staff; 
"(B) limiting the supervision and compensatory evalua-
tion of securities analysts to officials employed by the 
broker or dealer who are not engaged in investment 
banking activities; and 
116 STAT. 792 
PUBLIC LAW 107-204^^ULY 30, 2002 
"(C) requiring that a broker or dealer and persons 
employed by a broker or dealer who are involved with 
investment 
banking 
activities 
may 
not, 
directly 
or 
indirectly, retaliate against or threaten to retaliate against 
any securities analyst employed by that broker or dealer 
or its affiliates as a result of an adverse, negative, or 
otherwise unfavorable research report that may adversely 
affect the present or prospective investment banking rela-
tionship of the broker or dealer with the issuer that is 
the subject of the research report, except that such rules 
may not limit the authority of a broker or dealer to dis-
cipline a securities analyst for causes other than such 
research report in accordance with the policies and proce-
dures of the firm; 
"(2) to define periods during which brokers or dealers who 
have participated, or are to participate, in a public offering 
of securities as underwriters or dealers should not publish 
or otherwise distribute research reports relating to such securi-
ties or to the issuer of such securities; 
"(3) to establish structural and institutional safeguards 
within registered brokers or dealers to assure that securities 
analysts are separated by appropriate informational partitions 
within the firm from the review, pressure, or oversight of 
those whose involvement in investment banking activities 
might potentially bias their judgment or supervision; and 
"(4) to address such other issues as the Commission, or 
such association or exchange, determines appropriate. 
"(b) DISCLOSURE.—^The Commission, or upon the authorization 
and direction of the Commission, a registered securities association 
or national securities exchange, shall have adopted, not later than 
1 year after the date of enactment of this section, rules reasonably 
designed to require each securities analyst to disclose in public 
appearances, and each registered broker or dealer to disclose in 
each research report, as applicable, conflicts of interest that are 
known or should have been known by the securities analyst or 
the broker or dealer, to exist at the time of the appearance or 
the date of distribution of the report, including— 
"(1) the extent to which the securities analyst has debt 
or equity investments in the issuer that is the subject of the 
appearance or research report; 
"(2) whether any compensation has been received by the 
registered broker or dealer, or any affiliate thereof, including 
the securities analyst, from the issuer that is the subject of 
the appearance or research report, subject to such exemptions 
as the Commission may determine appropriate and necessary 
to prevent disclosure by virtue of this paragraph of material 
non-public information regarding specific potential 
future 
investment banking transactions of such issuer, as is appro-
priate in the public interest and consistent with the protection 
of investors; 
"(3) whether an issuer, the securities of which are rec-
ommended in the appearance or research report, currently is, 
or during the 1-year period preceding the date of the appearance 
or date of distribution of the report has been, a client of the 
registered broker or dealer, and if so, stating the types of 
services provided to the issuer; 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 793 
"(4) whether the securities analyst received compensation 
with respect to a research report, based upon (among any 
other factors) the investment banking revenues (either gen-
erally or specifically earned from the issuer being analyzed) 
of the registered broker or dealer; and 
"(5) such other disclosures of conflicts of interest that are 
material to investors, research analysts, or the broker or dealer 
as the Commission, or such association or exchange, determines 
appropriate. 
"(c) DEFINITIONS.—In this section— 
"(1) the term 'securities analyst' means any associated per-
son of a registered broker or dealer that is principally respon-
sible for, and any associated person who reports directly or 
indirectly to a securities analyst in connection with, the 
preparation of the substance of a research report, whether 
or not any such person has the job title of 'securities analyst'; 
and 
"(2) the term 'research report' means a written or electronic 
communication that includes an analysis of equity securities 
of individual companies or industries, and that provides 
information reasonably sufficient upon which to base an invest-
ment decision.". 
(b) ENFORCEMENT.—Section 21B(a) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78u-2(a)) is amended by inserting "15D," 
before "15B". 
(c) COMMISSION AUTHORITY.—The Commission may promulgate 
15 use 78o-6 
and amend its regulations, or direct a registered securities associa- note. 
tion or national securities exchange to promulgate and amend its 
rules, to carry out section 15D of the Securities Exchange Act 
of 1934, as added by this section, as is necessary for the protection 
of investors and in the public interest. 
TITLE VI—COMMISSION RESOURCES 
AND AUTHORITY 
SEC. 601. AUTHORIZATION OF APPROPRIATIONS. 
Section 35 of the Securities Exchange Act of 1934 (15 U.S.C. 
78kk) is amended to read as follows: 
"SEC. 35. AUTHORIZATION OF APPROPRIATIONS. 
"In addition to any other funds authorized to be appropriated 
to the Commission, there are authorized to be appropriated to 
carry out the functions, powers, and duties of the Commission, 
$776,000,000 for fiscal year 2003, of which— 
"(1) $102,700,000 shall be available to fund additional com-
pensation, including salaries and benefits, as authorized in 
the Investor and Capital Markets Fee Relief Act (Public Law 
107-123; 115 Stat. 2390 et seq.); 
"(2) $108,400,000 shall be available for information tech-
nology, security enhancements, and recovery and mitigation 
activities in light of the terrorist attacks of September 11, 
2001; and 
"(3) $98,000,000 shall be available to add not fewer than 
an additional 200 qualified professionals to provide enhanced 
oversight of auditors and audit services required by the Federal 
securities laws, and to improve Commission investigative and 
116 STAT. 794 
PUBLIC LAW 107-204-^ULY 30, 2002 
disciplinary efforts with respect to such auditors and services, 
as well as for additional professional support staff necessary 
to strengthen the programs of the Commission involving Full 
Disclosure and Prevention and Suppression of Fraud, risk 
management, industry technology review, compliance, inspec-
tions, 
examinations, 
market 
regulation, 
and 
investment 
management.". 
SEC. 602. 
APPEARANCE AND PRACTICE 
BEFORE THE COMMISSION. 
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
is amended by inserting after section 4B the following: 
15 use 78d-3. 
"SEC. 4C. APPEARANCE AND PRACTICE BEFORE THE COMMISSION. 
"(a) AUTHORITY TO CENSURE.—The Commission may censure 
any person, or deny, temporarily or permanently, to any person 
the privilege of appearing or practicing before the Commission 
in any way, if that person is foim.d by the Commission, after 
notice and opportunity for hearing in the matter— 
"(1) not to possess the requisite qualifications to represent 
others; 
"(2) to be lacking in character or integrity, or to have 
engaged in unethical or improper professional conduct; or 
"(3) to have willfully violated, or willfully aided and abetted 
the violation of, any provision of the securities laws or the 
rules and regulations issued thereunder. 
"(b) DEFINITION.—^With respect to any registered 
public 
accounting firm or associated person, for purposes of this section, 
the term 'improper professional conduct' means— 
"(1) intentional or knowing conduct, including reckless con-
duct, that results in a violation of applicable professional stand-
ards; and 
"(2) negligent conduct in the form of— 
"(A) a single instance of highly unreasonable conduct 
that results in a violation of applicable professional stand-
ards in circumstances in which the registered public 
accounting firm or associated person knows, or should 
know, that heightened scrutiny is warranted; or 
"(B) repeated instances of unreasonable conduct, each 
resulting in a violation of applicable professional standards, 
that indicate a lack of competence to practice before the 
Commission.". 
SEC. 603. FEDERAL COURT AUTHORITY TO IMPOSE PENNY STOCK 
BARS. 
(a) SECURITIES EXCHANGE ACT OF 1934.—Section 21(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)), as amended 
by this Act, is amended by adding at the end the following: 
"(6) AUTHORITY OF A COURT TO PROHIBIT PERSONS FROM PARTICI-
PATING IN AN OFFERING OF PENNY STOCK.— 
"(A) IN GENERAL.—In any proceeding under paragraph (1) 
against any person participating in, or, at the time of the 
alleged misconduct who was participating in, an offering of 
penny stock, the court may prohibit that person from partici-
pating in an offering of penny stock, conditionally or uncondi-
tionally, and permanently or for such period of time as the 
court shall determine. 
"(B) DEFINITION.—For purposes of this paragraph, the term 
'person participating in an offering of penny stock' includes 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 795 
any person engaging in activities with a broker, dealer, or 
issuer for purposes of issuing, trading, or inducing or 
attempting to induce the purchase or sale of, any penny stock. 
The Commission may, by rule or regulation, define such term 
to include other activities, and may, by rule, regulation, or 
order, exempt any person or class of persons, in whole or 
in part, conditionally or unconditionally, from inclusion in such 
term.". 
(b) SECURITIES ACT OF 1933.—Section 20 of the Securities Act 
of 1933 (15 U.S.C. 77t) is amended by adding at the end the 
following: 
"(g) 
AUTHORITY OF A COURT TO PROHIBIT PERSONS FROM 
PARTICIPATING IN AN OFFERING OF PENNY STOCK.— 
"(1) IN GENERAL.—In any proceeding under subsection (a) 
against £iny person participating in, or, at the time of the 
alleged misconduct, who was participating in, an offering of 
penny stock, the court may prohibit that person from partici-
pating in an offering of penny stock, conditionally or uncondi-
tionally, and permanently or for such period of time as the 
court shall determine. 
"(2) DEFINITION.—For purposes of this subsection, the term 
'person participating in an offering of penny stock' includes 
any person engaging in activities with a broker, dealer, or 
issuer for purposes of issuing, trading, or inducing or 
attempting to induce the purchase or sale of, any penny stock. 
The Commission may, by rule or regulation, define such term 
to include other activities, and may, by rule, regulation, or 
order, exempt any person or class of persons, in whole or 
in part, conditionally or unconditionally, from inclusion in such 
term.". 
SEC. 604. QUALIFICATIONS OF ASSOCIATED PERSONS OF BROKERS 
AND DEALERS. 
(a) BROKERS AND DEALERS.—Section 15(b)(4) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o) is amended— 
(1) by striking subparagraph (F) and inserting the fol-
lowing: 
"(F) is subject to any order of the Commission barring 
or suspending the right of the person to be associated with 
a broker or dealer;"; and 
(2) in subparagraph (G), by striking the period at the 
end and inserting the following: "; or 
"(H) is subject to any final order of a State securities 
commission (or any agency or officer performing like functions), 
State authority that supervises or examines banks, savings 
associations, or credit unions, State insurance commission (or 
any agency or office performing like functions), an appropriate 
Federal banking agency (as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(q))), or the National 
Credit Union Administration, that— 
"(i) bars such person from association with an entity 
regulated by such commission, authority, agency, or officer, 
or from engaging in the business of securities, insurance, 
banking, savings association activities, or credit union 
activities; or 
116 STAT. 796 
PUBLIC LAW 107-204-^ULY 30, 2002 
"(ii) constitutes a final order based on violations of 
any laws or regulations that prohibit fraudulent, manipula-
tive, or deceptive conduct,". 
(b) INVESTMENT ADVISERS.—Section 203(e) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-3(e)) is amended— 
(1) by striking paragraph (7) and inserting the following: 
"(7) is subject to any order of the Commission barring 
or suspending the right of the person to be associated with 
an investment adviser;"; 
(2) in paragraph (8), by striking the period at the end 
and inserting "; or"; and 
(3) by adding at the end the following: 
"(9) is subject to any final order of a State securities 
commission (or any agency or officer performing like functions), 
State authority that supervises or examines banks, savings 
associations, or credit unions, State insurance commission (or 
any agency or office performing like functions), an appropriate 
Federal banking agency (as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(q))), or the National 
Credit Union Administration, that— 
"(A) bars such person from association with an entity 
regulated by such commission, authority, agency, or officer, 
or from engaging in the business of securities, insurance, 
banking, savings association activities, or credit union 
activities; or 
"(B) constitutes a final order based on violations of 
any laws or regulations that prohibit fraudulent, manipula-
tive, or deceptive conduct.". 
(c) CONFORMING AMENDMENTS.— 
(1) SECURITIES EXCHANGE ACT OF 1934.—^The Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended— 
(A) in section 3(a)(39)(F) (15 U.S.C. 78c(aX39)(F))— 
(i) by striking "or (G)" and inserting "(H), or (G)"; 
and 
(ii) by inserting ", or is subject to an order or 
finding," before "enumerated"; 
(B) in each of section 
15(b)(6)(A)(i) (15 U.S.C. 
78o(bX6)(A)(i)), paragraphs (2) and (4) of section 15B(c) 
(15 U.S.C. 78o-4(c)), and subparagraphs (A) and (C) of 
section 15C(c)(l) (15 U.S.C. 78o-5(c)(l))— 
(i) by striking "or (G)" each place that term appears 
and inserting "(H), or (G)"; and 
(ii) by striking "or omission" each place that term 
appears, and inserting ", or is subject to an order 
or finding,"; and 
(C) in each of paragraphs (3)(A) and (4)(C) of section 
17A(c) (15 U.S.C. 78q-l(c))— 
(i) by striking "or (G)" each place that term appears 
and inserting "(H), or (G)"; and 
(ii) by inserting ", or is subject to an order or 
finding," before "enumerated" each place that term 
appears. 
(2) INVESTMENT ADVISERS ACT OF 1940.—Section 203(f) of 
the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is 
amended— 
(A) by striking "or (8)" and inserting "(8), or (9)"; and 
(B) by inserting "or (3)" after "paragraph (2)". 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 797 
TITLE VII—STUDIES AND REPORTS 
SEC. 701. GAO STUDY AND REPORT REGARDING CONSOLIDATION OF 15 USC 7201 
PUBLIC ACCOUNTING FIRMS. 
note. 
(a) STUDY REQUIRED.—The Comptroller General of the United 
States shall conduct a study— 
(1) to identify— 
(A) the factors that have led to the consolidation of 
public accounting firms since 1989 and the consequent 
reduction in the number of firms capable of providing audit 
services to large national and multi-national business 
organizations that are subject to the securities laws; 
(B) the present and future impact of the condition 
described in subparagraph (A) on capital formation and 
securities markets, both domestic and international; and 
(C) solutions to any problems identified under subpara-
graph (B), including ways to increase competition and the 
number of firms capable of providing audit services to 
large national and multinational business organizations 
that are subject to the securities laws; 
(2) of the problems, if any, faced by business organizations 
that have resulted from limited competition among public 
accounting firms, including— 
(A) higher costs; 
(B) lower quality of services; 
(C) impairment of auditor independence; or 
(D) lack of choice; and 
(3) whether and to what extent Federal or State regulations 
impede competition among public accounting firms. 
(b) CONSULTATION.—In planning and conducting the study 
under this section, the Comptroller General shall consult with— 
(1) the Commission; 
(2) the regulatory agencies that perform fimctions similar 
to the Commission within the other member countries of the 
Group of Seven Industrialized Nations; 
(3) the Department of Justice; and 
(4) £my other public or private sector organization that 
the Comptroller General considers appropriate. 
(c) REPORT REQUIRED.—Not later than 1 year after the date Deadline. 
of enactment of this Act, the Comptroller General shall submit 
a report on the results of the study required by this section to 
the Committee on Banking, Housing, and Urban Affairs of the 
Senate and the Committee on Financial Services of the House 
of Representatives. 
SEC. 702. COMMISSION STUDY AND REPORT REGARDING CREDIT 
RATING AGENCIES. 
(a) STUDY REQUIRED.— 
(1) IN GENERAL.—^The Commission shall conduct a study 
of the role and function of credit rating agencies in the operation 
of the securities market. 
(2) AREAS OF CONSIDERATION.—The study required by this 
subsection shall examine— 
(A) the role of credit rating agencies in the evaluation 
of issuers of securities; 
. 
116 STAT. 798 
PUBLIC LAW 107-204-^ULY 30, 2002 
(B) the importance of that role to investors and the 
functioning of the securities markets; 
(C) any impediments to the accurate appraisal by credit 
rating agencies of the financial resources and risks of 
issuers of securities; 
(D) any barriers to entry into the business of acting 
as a credit rating agency, and any measures needed to 
remove such barriers; 
(E) any measures which may be required to improve 
the dissemination of information concerning such resources 
and risks when credit rating agencies announce credit 
ratings; and 
(F) any conflicts of interest in the operation of credit 
rating agencies and measures to prevent such conflicts 
or ameliorate the consequences of such conflicts. 
Deadline. 
(b) REPORT REQUIRED.—The Commission shall submit a report 
on the study required by subsection (a) to the President, the Com-
mittee on Financial Services of the House of Representatives, and 
the Committee on Banking, Housing, and Urban Affairs of the 
Senate not later than 180 days after the date of enactment of 
this Act. 
SEC. 703. STUDY AND REPORT ON VIOLATORS AND VIOLATIONS. 
(a) STUDY.—^The Commission shall conduct a study to deter-
mine, based upon information for the period from January 1, 1998, 
to December 31, 2001— 
(1) the number of securities professionals, defined as public 
accountants, public accounting firms, investment bsiiikers, 
investment advisers, brokers, dealers, attorneys, and other 
securities professionals practicing before the Commission— 
(A) who have been foiuid to have aided and abetted 
a violation of the Federal securities laws, including rules 
or 
regulations 
promulgated 
thereunder 
(collectively 
referred to in this section as "Federal securities laws"), 
but who have not been sanctioned, disciplined, or otherwise 
penalized as a primary violator in any administrative 
action or civil proceeding, including in any settlement of 
such an action or proceeding (referred to in this section 
as "aiders and abettors"); and 
(B) who have been found to have been primary violators 
of the Federal securities laws; 
(2) a description of the Federal securities laws violations 
committed by aiders and abettors and by primary violators, 
including— 
(A) the specific provision of the Federal securities laws 
violated; 
(B) the specific sanctions and penalties imposed upon 
such aiders and abettors and primary violators, including 
the amount of any monetary penalties assessed upon and 
collected from such persons; 
(C) the occurrence of multiple violations by the same 
person or persons, either as an aider or abettor or as 
a primary violator; and 
(D) whether, as to each such violator, disciplinary sanc-
tions have been imposed, including any censure, suspen-
sion, temporary bar, or permanent bar to practice before 
the Commission; and 
PUBLIC LAW 107-204—JULY 30, 2002 
116 STAT. 799 
(3) the amount of disgorgement, restitution, or any other 
fines or payments that the Commission has assessed upon 
and collected from, aiders and abettors and from primary viola-
tors. 
(b) REPORT.—^A report based upon the study conducted pursuant 
to subsection (a) shall be submitted to the Committee on Banking, 
Housing, and Urban Affairs of the Senate, and the Committee 
on Financial Services of the House of Representatives not later 
than 6 months after the date of enactment of this Act. 
SEC. 704. STUDY OF ENFORCEMENT ACTIONS. 
(a) STUDY REQUIRED.—The Commission shall review and ana-
lyze all enforcement actions by the Commission involving violations 
of reporting requirements imposed under the securities laws, and 
restatements of financial statements, over the 5-year period pre-
ceding the date of enactment of this Act, to identify areas of 
reporting that are most susceptible to fraud, inappropriate manipu-
lation, or inappropriate earnings management, such as revenue 
recognition and the accounting treatment of off-balance sheet special 
purpose entities. 
(b) 
REPORT 
REQUIRED.—The Commission shall report its Deadline, 
findings to the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing, and 
Urban Affairs of the Senate, not later than 180 days after 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 regulatory or legislative steps that are recommended 
or that may be necessary to address concerns identified in the 
study. 
SEC. 705. STUDY OF INVESTMENT BANKS. 
(a) GAO STUDY.—The Comptroller General of the United States 
shall conduct a study on whether investment banks and financial 
advisers assisted public companies in manipulating their earnings 
and obfuscating their true financial condition. The study should 
address the rule of investment banks and financial advisers— 
(1) in the collapse of the Enron Corporation, including 
with respect to the design and implementation of derivatives 
transactions, transactions involving special purpose vehicles, 
and other financial arrangements that may have had the effect 
of altering the company's reported financial statements in ways 
that obscured the true financial picture of the company; 
(2) in the failure of Global Crossing, including with respect 
to transactions involving swaps of fiberoptic cable capacity, 
in the designing transactions that may have had the effect 
of altering the company's reported financial statements in ways 
that obscured the true financial picture of the company; and 
(3) generally, in creating and marketing transactions which 
may have been designed solely to enable companies to manipu-
late revenue streams, obtain loans, or move liabilities off bal-
ance sheets without altering the economic and business risks 
faced by the companies or any other mechanism to obscure 
a company's financial picture. 
(b) REPORT.—^The Comptroller General shall report to Congress Deadline, 
not later than 180 days after the date of enactment of this Act 
on the results of the study required by this section. The report 
shall include a discussion of regulatory or legislative steps that 
116 STAT. 800 
PUBLIC LAW 107-204-^ULY 30, 2002 
Corporate and 
Criminal Fraud 
Accountability 
Act of 2002. 
18 u s e 1501 
note. 
Regulations. 
are recommended or that may be necessary to address concerns 
identified in the study. 
TITLE VIII—CORPORATE AND 
CRIMINAL FRAUD ACCOUNTABILITY 
SEC. 801. SHORT TITLE. 
This title may be cited as the "Corporate and Criminal Fraud 
Accountability Act of 2002". 
SEC. 802. CRIMINAL PENALTIES FOR ALTERING DOCUMENTS. 
(a) IN GENERAL.—Chapter 73 of title 18, United States Code, 
is amended by adding at the end the following: 
''§ 1519. Destruction, alteration, or falsiHcation of records 
in Federal investigations and bankruptcy 
"Whoever knowingly alters, destroys, mutilates, conceals, covers 
up, falsifies, or makes 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 matter within 
the jurisdiction of any department or agency of the United States 
or any case filed under title 11, or in relation to or contemplation 
of any such matter or case, shall be fined under this title, impris-
oned not more than 20 years, or both. 
'*§ 1520. Destruction of corporate audit records 
"(a)(1) Any accountant who conducts an audit of an issuer 
of securities to which section lOA(a) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78j-l(a)) applies, shall maintain all audit 
or review workpapers for a period of 5 years from the end of 
the fiscal period in which the audit or review was concluded. 
"(2) The Securities and Exchange Commission shall promulgate, 
within 180 days, after adequate notice and an opportunity for 
comment, such rules and regulations, as are reasonably necessary, 
relating to the retention of relevant records such as workpapers, 
documents that form the basis of an audit or review, memoranda, 
correspondence, communications, other documents, and records 
(including electronic records) which are created, sent, or received 
in connection with an audit or review and contain conclusions, 
opinions, analyses, or financial data relating to such an audit or 
review, which is conducted by any accountant who conducts an 
audit of an issuer of securities to which section lOA(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78j-l(a)) applies. The 
Commission may, from time to time, amend or supplement the 
rules and regulations that it is required to promulgate under this 
section, after adequate notice and an opportunity for comment, 
in order to ensure that such rules and regulations adequately 
comport with the purposes of this section. 
"(b) Whoever knowingly and willfully violates subsection (a)(1), 
or any rule or regulation promulgated by the Securities and 
Exchange Commission under subsection (a)(2), shall be fined under 
this title, imprisoned not more than 10 years, or both. 
"(c) Nothing in this section shall be deemed to diminish or 
relieve any person of any other duty or obligation imposed by 
Federal or State law or regulation to maintain, or refrain from 
destroying, any document.". 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 801 
(b) CLERICAL AMENDMENT.—The table of sections at the begin-
ning of chapter 73 of title 18, United States Code, is amended 
by adding at the end the following new items: 
"1519. Destruction, alteration, or falsification of records in Federal investigations 
and bankruptcy. 
"1520. Destruction of corporate audit records.". 
SEC. 803. DEBTS NONDISCHARGEABLE IF INCURRED IN VIOLATION 
OF SECURITIES FRAUD LAWS. 
Section 523(a) of title 11, United States Code, is amended— 
(1) in paragraph (17), by striking "or" after the semicolon; 
(2) in paragraph (18), by striking the period at the end 
and inserting "; or"; and 
(3) by adding at the end, the following: 
"(19) that— 
"(A) is for— 
"(i) the violation of any of the Federal securities 
laws (as that term is defined in section 3(a)(47) of 
the Securities Exchange Act of 1934), any of the State 
securities laws, or any regulation or order issued under 
such Federal or State securities laws; or 
"(ii) common law fraud, deceit, or manipulation 
in connection with the purchase or sale of any security; 
and 
"(B) results from— 
"(i) any judgment, order, consent order, or decree 
entered in any Federal or State judicial or administra-
tive proceeding; 
"(ii) any settlement agreement entered into by the 
debtor; or 
"(iii) any court or administrative order for any 
damages, fine, penalty, citation, restitutionary pay-
ment, disgorgement payment, attorney fee, cost, or 
other payment owed by the debtor.". 
SEC. 804. STATUTE OF LIMITATIONS FOR SECURITIES FRAUD. 
(a) IN GENERAL.—Section 1658 of title 28, United States Code, 
is amended— 
(1) by inserting "(a)" before "Except"; and 
(2) by adding at the end the following: 
"(b) Notwithstanding subsection (a), a private right of action 
that involves a claim of fraud, deceit, manipulation, or contrivance 
in contravention of a regulatory requirement concerning the securi-
ties laws, as defined in section 3(a)(47) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(47)), may be brought not later than 
the earlier of— 
"(1) 2 years after the discovery of the facts constituting 
the violation; or 
"(2) 5 years after such violation.". 
(b) EFFECTIVE DATE.—The limitations period provided by sec- 28 use 1658 
tion 1658(b) of title 28, United States Code, as added by this note. 
section, shall apply to all proceedings addressed by this section 
that are commenced on or after the date of enactment of this 
Act. 
(c) No CREATION OF ACTIONS.—^Nothing in this section shall 28 use 1658 
create a new, private right of action. 
. 
note. 
116 STAT. 802 
PUBLIC LAW 107-204-^ULY 30, 2002 
28 u s e 994 note. 
SEC. 805. REVIEW OF FEDERAL SENTENCING GUIDELINES FOR 
OBSTRUCTION OF JUSTICE AND EXTENSIVE CRIMINAL 
FRAUD. 
(a) ENHANCEMENT OF FRAUD AND OBSTRUCTION OF JUSTICE 
SENTENCES.—Pursuant to section 994 of title 28, United States 
Code, and in accordance with this section, the United States Sen-
tencing Commission shall review and amend, as appropriate, the 
Federal Sentencing Guidelines and related policy statements to 
ensure that— 
(1) the base offense level and existing enhancements con-
tained in United States Sentencing Guideline 2J1.2 relating 
to obstruction of justice are sufficient to deter and punish 
that activity; 
(2) the enhancements and specific offense characteristics 
relating to obstruction of justice are adequate in cases where— 
(A) the destruction, alteration, or fabrication of evi-
dence involves— 
(i) a large amount of evidence, a large number 
of participants, or is otherwise extensive; 
(ii) the selection of evidence that is particularly 
probative or essential to the investigation; or 
(iii) more than minimal planning; or 
(B) the offense involved abuse of a special skill or 
a position of trust; 
(3) the guideline offense levels and enhancements for viola-
tions of section 1519 or 1520 of title 18, United States Code, 
as added by this title, are sufficient to deter and punish that 
activity; 
(4) a specific offense characteristic enhancing sentencing 
is provided under United States Sentencing Guideline 2B1.1 
(as in effect on the date of enactment of this Act) for a fraud 
offense that endangers the solvency or financial security of 
a substantial number of victims; and 
(5) the guidelines that apply to organizations in United 
States Sentencing Guidelines, chapter 8, are sufficient to deter 
and punish organizational criminal misconduct. 
(b) EMERGENCY AUTHORITY AND DEADLINE FOR COMMISSION 
Deadline. 
ACTION.—^The United states Sentencing Commission is requested 
to promulgate the guidelines or amendments provided for under 
this section as soon as practicable, and in any event not later 
than 180 days after the date of enactment of this Act, in accordance 
with the prcedures set forth in section 219(a) of the Sentencing 
Reform Act of 1987, as though the authority under that Act had 
not expired. 
SEC. 
806. PROTECTION FOR EMPLOYEES OF PUBLICLY TRADED 
COMPANIES WHO PROVIDE EVIDENCE OF FRAUD. 
(a) IN GENERAL.—Chapter 73 of title 18, United States Code, 
is amended by inserting after section 1514 the following: 
"§ 1514A. Civil action to protect against retaliation in fraud 
cases 
"(a) WHISTLEBLOWER PROTECTION FOR EMPLOYEES OF PUBLICLY 
TRADED COMPANIES.—^No company with a class of securities reg-
istered under section 12 of the Securities Exchange Act of 1934 
(15 U.S.C. 781), or that is required to file reports under section 
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)), 
PUBLIC LAW 107-204-JULY 30, 2002 
116 STAT. 803 
or any officer, employee, contractor, subcontractor, or agent of such 
company, may discharge, demote, suspend, threaten, harass, or 
in any other manner discriminate against an employee in the terms 
and conditions of employment because of any lawful act done by 
the employee— 
"(1) to provide information, cause information to be pro-
vided, or otherwise assist in an investigation regarding any 
conduct which the employee reasonably believes constitutes 
a violation of section 1341, 1343, 1344, or 1348, any rule or 
regulation of the Securities and Exchange Commission, or any 
provision of Federal law relating to fraud against shareholders, 
when the information or assistance is provided to or the inves-
tigation is conducted by— 
"(A) a Federal regulatory or law enforcement agency; 
"(B) any Member of Congress or any committee of 
Congress; or 
"(C) a person with supervisory authority over the 
employee (or such other person working for the employer 
who has the authority to investigate, discover, or terminate 
misconduct); or 
"(2) to file, cause to be filed, testify, participate in, or 
otherwise assist in a proceeding filed or about to be filed 
(with any knowledge of the employer) relating to an alleged 
violation of section 1341, 1343, 1344, or 1348, any rule or 
regulation of the Securities and Exchange Commission, or any 
provision of Federal law relating to fraud against shareholders. 
"(b) ENFORCEMENT ACTION.— 
"(1) IN GENERAL.—^A person who alleges discharge or other 
discrimination by any person in violation of subsection (a) may 
seek relief under subsection (c), by— 
"(A) filing a complaint with the Secretary of Labor; 
or 
"(B) if the Secretary has not issued a final decision 
within 180 days of the filing of the complaint and there 
is no showing that such delay is due to the bad faith 
of the claimant, bringing an action at law or equity for 
de novo review in the appropriate district court of the 
United States, which shall have jurisdiction over such an 
action without regard to the amount in controversy. 
"(2) PROCEDURE.— 
"(A) IN GENERAL.—^An action imder paragraph (1)(A) 
shall be governed under the rules and procedures set forth 
in section 42121(b) of title 49, United States Code. 
"(B) EXCEPTION.—^Notification made under 
section 
42121(bXl) of title 49, United States Code, shall be made 
to the person named in the complaint and to the employer. 
"(C) BURDENS OF PROOF.—^An action brought under 
paragraph (1)(B) shall be governed by the legal burdens 
of proof set forth in section 42121(b) of title 49, United 
States Code. 
"(D) STATUTE OF LIMITATIONS.—^An action under para- DeadUne. 
graph (1) shall be commenced not later than 90 days after 
the date on which the violation occurs. 
"(c) REMEDIES.— 
"(1) IN GENERAL.—An employee prevailing in any action 
under subsection (b)(1) shall be entitled to all relief necessary 
to make the employee whole. 
116 STAT. 804 
PUBLIC LAW 107-204-^ULY 30, 2002 
"(2) COMPENSATORY DAMAGES.—^Relief for any action under 
paragraph (1) shall include— 
"(A) reinstatement with the same seniority status that 
the employee would have had, but for the discrimination; 
"(B) the amount of back pay, with interest; and 
"(C) compensation for any special damages sustained 
as a result of the discrimination, including litigation costs, 
expert witness fees, and reasonable attorney fees. 
"(d) RIGHTS RETAINED BY EMPLOYEE.—Nothing in this section 
shall be deemed to diminish the rights, privileges, or remedies 
of any employee under any Federal or State law, or under any 
collective bargaining agreement.". 
(b) CLERICAL AMENDMENT.—^The table of sections at the begin-
ning of chapter 73 of title 18, United States Code, is amended 
by inserting after the item relating to section 1514 the following 
new item: 
"1514A. Civil action to protect against retaliation in fraud cases.". 
SEC. 807. CRIMINAL PENALTIES FOR DEFRAUDING SHAREHOLDERS 
OF PUBLICLY TRADED COMPANIES. 
(a) IN GENERAL.—Chapter 63 of title 18, United States Code, 
is amended by adding at the end the following: 
"§ 1348. Securities fraud 
"Whoever knowingly executes, or attempts to execute, a scheme 
or artifice— 
"(1) to defraud any person in connection with any security 
of an issuer with a class of securities registered under section 
12 of the Securities Exchange Act of 1934 (15 U.S.C. 781) 
or that is required to file reports under section 15(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or 
"(2) to obtain, by means of false or fraudulent pretenses, 
representations, or promises, any money or property in connec-
tion with the purchase or sale of any security of an issuer 
with a class of securities registered under section 12 of the 
Securities Exchange Act of 1934 (15 U.S.C. 781) or that is 
required to file reports under section 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o(d)); 
shall be fined under this title, or imprisoned not more than 25 
years, or both.". 
(b) CLERICAL AMENDMENT.—^The table of sections at the begin-
ning of chapter 63 of title 18, United States Code, is amended 
by adding at the end the following new item: 
"1348. Securities fraud.". 
white-couar 
TITLE IX—WHITE-COLLAR CRIME 
E S L J S 
PENALTY ENHANCEMENTS 
Act of 2002. 
18USC1341 
SEC. 901. SHORT TITLE. 
This title may be cited as the "White-Collar Crime Penalty 
Enhancement Act of 2002". 
PUBLIC LAW 107-204^-J^ULY 30, 2002 
116 STAT. 805 
SEC. 902. ATTEMPTS AND CONSPIRACIES TO COMMIT CRIMINAL 
FRAUD OFFENSES. 
(a) IN GENERAL.—Chapter 63 of title 18, United States Code, 
is amended by inserting after section 1348 as added by this Act 
the following: 
"§ 1349. Attempt and conspiracy 
"Any person who attempts or conspires to commit any offense 
under this chapter shall be subject to the same penalties as those 
prescribed for the offense, the commission of which was the object 
of the attempt or conspiracy. 
(b) CLERICAL AMENDMENT.—^The table of sections at the begin-
ning of chapter 63 of title 18, United States Code, is amended 
by adding atthe end the following new item: 
"1349. Attempt and conspiracy.". 
SEC. 903. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD. 
(a) MAIL FRAUD.—Section 1341 of title 18, United States Code, 
is amended by striking "five" and inserting "20". 
(b) WIRE FRAUD.-—Section 1343 of title 18, United States Code, 
is amended by striking "five" and inserting "20". 
SEC. 904. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE 
RETIREMENT INCOME SECURITY ACT OF 1974. 
Section 501 of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1131) is amended— 
(1) by striking "$5,000" and inserting "$100,000"; 
(2) by striking "one year" and inserting "10 years"; and 
(3) by striking "$100,000" and inserting "$500,000". 
SEC. 905. AMENDMENT TO SENTENCING GUIDELINES RELATING TO 28 USC 994 note. 
CERTAIN WHITE-COLLAR OFFENSES. 
(a) DIRECTIVE TO THE UNITED STATES SENTENCING COMMIS-
SION.—Pursuant to its authority under section 994(p) of title 18, 
United States Code, and in accordance with this section, the United 
States Sentencing Commission shall review and, as appropriate, 
amend the Federal Sentencing Guidelines and related policy state-
ments to implement the provisions of this Act. 
(b) REQUIREMENTS.—In carrying out this section, the Sen-
tencing Commission shall— 
(1) ensure that the sentencing guidelines and policy state-
ments reflect the serious nature of the offenses and the pen-
alties set forth in this Act, the growing incidence of serious 
fraud offenses which are identified above, and the need to 
modify the sentencing guidelines and policy statements to deter, 
prevent, and punish such offenses; 
(2) consider the extent to which the guidelines and policy 
statements adequately address whether the guideline offense 
levels and enhancements for violations of the sections amended 
by this Act are sufficient to deter and punish such offenses, 
and specifically, are adequate in view of the statutory increases 
in penalties contained in this Act; 
(3) assure reasonable consistency with other relevant direc-
tives and sentencing guidelines; 
(4) account for any additional aggravating or mitigating 
circumstances that might justify exceptions to the generally 
applicable sentencing ranges; 
116 STAT. 806 
PUBLIC LAW 107-204—JULY 30, 2002 
(5) make any necessary conforming changes to the sen-
tencing guidelines; and 
(6) assure that the guidelines adequately meet the purposes 
of sentencing, as set forth in section 3553(a)(2) of title 18, 
United States Code. 
(c) EMERGENCY AUTHORITY AND DEADLINE FOR COMMISSION 
ACTION.—The United States Sentencing Commission is requested 
to promulgate the guidelines or amendments provided for under 
this section as soon as practicable, and in any event not later 
than 180 days after the date of enactment of this Act, in accordance 
with the procedures set forth in section 219(a) of the Sentencing 
Reform Act of 1987, as though the authority under that Act had 
not expired. 
SEC. 906. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS. 
(a) IN GENERAL.—Chapter 63 of title 18, United States Code, 
is amended by inserting after section 1349, as created by this 
Act, the following: 
"§1350. Failure of corporate officers to certify 
financial 
reports 
(a) CERTIFICATION OF PERIODIC FINANCIAL REPORTS.—Each 
periodic report containing financial statements filed by an issuer 
with the Securities Exchange Commission pursuant to section 13(a) 
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) 
or 78o(d)) shall be accompanied by a written statement by the 
chief executive officer and chief financial officer (or equivalent 
thereof) of the issuer. 
"(b) CONTENT.—^The statement required under subsection (a) 
shall certify that the periodic report containing the financial state-
ments fully complies with the requirements of section 13(a) or 
15(d) of the Securities Exchange Act pf 1934 (15 U.S.C. 78m or 
78o(d)) and that information contained in the periodic report fairly 
presents, in all material respects, the financial condition and results 
of operations of the issuer. 
"(c) CRIMINAL PENALTIES.—^Whoever— 
"(1) certifies any statement as set forth in subsections 
(a) and (b) of this section knowing that the periodic report 
accompanying the statement does not comport with all the 
requirements set forth in this section shall be fined not more 
than $1,000,000 or imprisoned not more than 10 years, or 
both; or 
"(2) willfully certifies any statement as set forth in sub-
sections (a) and (b) of this section knowing that the periodic 
report accompanying the statement does not comport with all 
the requirements set forth in this section shall be fined not 
more than $5,000,000, or imprisoned not more than 20 years, 
or both.". 
(b) CLERICAL AMENDMENT.—The table of sections at the begin-
ning of chapter 63 of title 18, United States Code, is amended 
by adding at the end the following: 
"1350. Failure of corporate officers to certify financial reports.". 
PUBLIC LAW 107-204-JULY 30, 2002 
116 STAT. 807 
TITLE 
X—CORPORATE 
TAX 
RETURNS 
SEC. 1001. SENSE OF THE SENATE REGARDING THE SIGNING OF COR-
PORATE TAX RETURNS BY CHIEF EXECUTIVE OFFICERS. 
It is the sense of the Senate that the Federal income tax 
return of a corporation should be signed by the chief executive 
officer of such corporation. 
TITLE XI—CORPORATE FRAUD 
corporate Fraud 
Accountability 
Act of 2002. 
ACCOUNTABILITY 
SEC. 1101. SHORT TITLE. 
15 USC 78a note. 
This title may be cited as the "Corporate Fraud Accoimtability 
Act of 2002". 
SEC. 1102. TAMPERING WITH A RECORD OR OTHERWISE IMPEDING 
AN OFFICIAL PROCEEDING. 
Section 1512 of title 18, United States Code, is amended— 
(1) by redesignating subsections (c) through (i) £is sub-
sections (d) through (j), respectively; and 
(2) by inserting after subsection (b) the following new sub-
section: 
"(c) Whoever corruptly— 
"(1) alters, destroys, mutilates, or conceals a record, docu-
ment, or other object, or attempts to do so, with the intent 
to impair the object's integrity or availability for use in an 
• 
official proceeding; or 
"(2) otherwise obstructs, influences, or impedes any official 
proceeding, or attempts to do so, 
shall be fined under this title or imprisoned not more than 20 
years, or both.". 
SEC. 1103. TEMPORARY FREEZE AUTHORITY FOR THE SECURITIES AND 
EXCHANGE COMMISSION. 
(a) IN GENERAL.—Section 21C(c) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78u-3(c)) is amended by adding at the 
end the following: 
"(3) TEMPORARY FREEZE.— 
"(A) I N GENERAL.— 
"(i) ISSUANCE OF TEMPORARY ORDER.—Whenever, 
during the course of a lawful investigation involving 
possible violations of the Federal securities laws by 
an issuer of publicly traded securities or any of its 
directors, officers, partners, controlling persons, agents, 
or employees, it shall appear to the Commission that 
it is likely that the issuer will make extraordinary 
payments (whether compensation or otherwise) to any 
of the foregoing persons, the Commission may petition 
a Federal ^strict court for a temporary order requiring 
the issuer to escrow, subject to court supervision, those 
payments in an interest-bearing account for 45 days. 
"(ii) STANDARD.—A temporary order shall be 
entered under clause (i), only after notice and oppor-
tunity for a hearing, unless the court determines that 
99-194 O - 03 - 27 : QL 3 Part 1 
116 STAT. 808 
PUBLIC LAW 107-204-JULY 30, 2002 
notice and hearing prior to entry of the order would 
be impracticable or contrary to the public interest. 
"(iii) 
EFFECTIVE 
PERIOD.—^A temporary 
order 
issued under clause (i) shall— 
"(I) become effective immediately; 
"(II) be served upon the parties subject to it; 
and 
"(III) unless set aside, limited or suspended 
by a court of competent jurisdiction, shall remain 
effective and enforceable for 45 days. 
"(iv) 
EXTENSIONS 
AUTHORIZED.—The 
effective 
period of an order under this subparagraph may be 
extended by the court upon good cause shown for not 
longer than 45 additional days, provided that the com-
bined period of the order shall not exceed 90 days. 
"(B) PROCESS ON DETERMINATION OF VIOLATIONS.— 
"(i) VIOLATIONS CHARGED.—If the issuer or other 
person described in subparagraph (A) is chsirged with 
any violation of the Federal securities laws before the 
expiration of the effective period of a temporary order 
under subparagraph (A) (including any applicable 
extension period), the order shall remain in effect, 
subject to court approval, until the conclusion of any 
legal proceedings related thereto, and the affected 
issuer or other person, shall have the right to petition 
the court for review of the order. 
"(ii) VIOLATIONS NOT CHARGED.—If the issuer or 
other person described in subparagraph (A) is not 
charged with any violation of the Federal securities 
laws before the expiration of the effective period of 
a temporary order under subparagraph (A) (including 
any applicable extension period), the escrow shall 
terminate at the expiration of the 45-day effective 
period (or the expiration of any extension period, as 
applicable), and the disputed pa5Tnents (with accrued 
interest) shall be returned to the issuer or other 
affected person.". 
(b) TECHNICAL AMENDMENT.—Section 21C(c)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-3(cX2)) is amended by striking 
"This" and inserting "paragraph (1)". 
28 use 994 note. 
SEC. 1104. AMENDMENT TO THE FEDERAL SENTENCING GUIDELINES. 
(a) REQUEST FOR IMMEDIATE CONSIDERATION BY THE UNITED 
STATES SENTENCING COMMISSION.—Pursuant to its authority under 
section 994(p) of title 28, United States Code, and in accordance 
with this section, the United States Sentencing Commission is 
requested to— 
(1) promptly review the sentencing guidelines applicable 
to securities and accounting fraud and related offenses; 
(2) expeditiously consider the promulgation of new sen-
tencing guidelines or amendments to existing sentencing guide-
lines to provide an enhancement for officers or directors of 
publicly traded corporations who commit fraud and related 
offenses; and 
(3) submit to Congress an explanation of actions taken 
by the Sentencing Commission pursuant to paragraph (2) and 
PUBLIC LAW 107-204-^ULY 30, 2002 
116 STAT. 809 
any additional policy recommendations the Sentencing Commis-
sion may have for combating offenses described in paragraph 
(1). 
(b) CONSIDERATIONS IN REVIEW.—In carrying out this section, 
the Sentencing Commission is requested to— 
(1) ensure that the sentencing guidelines and policy state-
ments reflect the serious nature of securities, pension, and 
accounting fraud and the need for aggressive and appropriate 
law enforcement action to prevent such offenses; 
(2) assure reasonable consistency with other relevant direc-
tives and with other guidelines; 
(3) account for any aggravating or mitigating circumstances 
that might justify exceptions, including circumstances for which 
the sentencing guidelines currently provide sentencing enhance-
ments; 
(4) ensure that guideline offense levels and enhancements 
for an obstruction of 
justice offense are adequate in cases where 
documents or other physical evidence are actually destroyed 
or fabricated; 
(5) ensure that the guideline offense levels and enhance-
ments under United States Sentencing Guideline 2B1.1 (as 
in effect on the date of enactment of this Act) are sufficient 
for a fraud offense when the number of victims adversely 
involved is significantly greater than 50; 
(6) make any necessary conforming changes to the sen-
tencing guidelines; and 
(7) assure that the guidelines adequately meet the purposes 
of sentencing as set forth in section 3553 (a)(2) of title 18, 
United States Code. 
(c) EMERGENCY AUTHORITY AND DEADLINE FOR COMMISSION 
ACTION.—The United States Sentencing Commission is requested Deadline, 
to promulgate the guidelines or amendments provided for under 
this section as soon as practicable, and in any event not later 
than the 180 days after the date of enactment of this Act, in 
accordance with the procedures sent forth in section 21(a) of the 
Sentencing Reform Act of 1987, as though the authority under 
that Act had not expired. 
SEC. 1105. AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS 
FROM SERVING AS OFFICERS OR DIRECTORS. 
(a) SECURITIES EXCHANGE ACT OF 1934.—Section 21C of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u-3) is amended 
by adding at the end the following: 
"(f) AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS FROM 
SERVING AS OFFICERS OR DIRECTORS.—In any cease-and-desist pro-
ceeding under subsection (a), the Commission may issue an order 
to prohibit, conditionally or unconditionally, and permanently or 
for such period of time as it shall determine, any person who 
has violated section 10(b) or the rules or regulations thereunder, 
from acting as an officer or director of any issuer that has a 
class of securities registered pursuant to section 12, or that is 
required to file reports pursuant to section 15(d), if the conduct 
of that person demonstrates unfitness to serve as an officer or 
director of any such issuer.". 
(b) SECURITIES ACT OF 1933.—Section 8A of the Securities 
Act of 1933 (15 U.S.C. 77h-l) is amended by adding at the end 
of the following: 
116 STAT. 810 
PUBLIC LAW 107-204-^ULY 30, 2002 
"(f) AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS FROM 
SERVING AS OFFICERS OR DIRECTORS.—^In any cease-and-desist pro-
ceeding under subsection (a), the Commission may issue an order 
to prohibit, conditionally or unconditionally, and permanently or 
for such period of time as it shall determine, any person who 
has violated section 17(a)(1) or the rules or regulations 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 that Act, if the conduct of that person dem-
onstrates unfitness to serve as an officer or director of any such 
issuer.". 
SEC. 1106. INCREASED CRIMINAL PENALTIES UNDER SECURITIES 
EXCHANGE ACT OF 1934. 
Section 32(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78ffla)) is amended— 
(1) by striking "$1,000,000, or imprisoned not more than 
10 years" and inserting "$5,000,000, or imprisoned not more 
than 20 years"; and 
(2) by striking "$2,500,000" and inserting "$25,000,000". 
SEC. 1107. RETALIATION AGAINST INFORMANTS. 
(a) IN GENERAL.—Section 1513 of title 18, United States Code, 
is amended by adding at the end the following: 
Penalties. 
"(e) Whoever knowingly, with the intent to retaliate, takes 
any action harmful to any person, including interference with the 
lawful employment or livelihood of any person, for providing to 
a law enforcement officer any truthful information relating to the 
conmiission or possible commission of any Federal offense, shall 
be fined under this title or imprisoned not more than 10 years, 
or both.". 
Approved July 30, 2002. 
L E G I S L A T I V E H I S T O R Y — H . R . 3763 (S. 2673): 
H O U S E REPORTS: Nos. 107-414 (Comm. on Financial Services) and 107-610 
(Comm. of Conference). 
S E N A T E REPORTS: No. 107-205 accompanying S. 2673 (Comm. on Banking, Hous-
ing, and Urban Affairs). 
CONGRESSIONAL RECORD, Vol. 148 (2002): 
Apr. 24, considered and passed House. 
July 15, considered and passed Senate, amended, in lieu of S. 2673. 
July 25, House and Senate agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTL^L DOCUMENTS, Vol. 38 (2002): 
July 30, Presidential remarks and statement.