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Public Law 107-204
107th Congress
An Act
To protect investors by improving the accuracy and reliability of
corporate disclosures made pursuant to the securities laws, and for
other purposes. <<NOTE: July 30, 2002 - [H.R. 3763]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress <<NOTE: Sarbanes-Oxley Act of
2002. Corporate responsibility.>> assembled,
SECTION 1. SHORT <<NOTE: 15 USC 7201 note.>> TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Sarbanes-Oxley Act
of 2002''.
(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. Disclosures of transactions involving management and principal
stockholders.
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Sec. 404. Management assessment of internal controls.
Sec. 405. Exemption.
Sec. 406. Code of ethics for senior financial officers.
Sec. 407. Disclosure 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 securities 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
fraud laws.
Sec. 804. Statute of limitations for securities fraud.
Sec. 805. Review of Federal Sentencing Guidelines for obstruction of
justice and extensive criminal fraud.
Sec. 806. Protection for employees of publicly traded companies who
provide evidence of fraud.
Sec. 807. Criminal penalties for defrauding shareholders of publicly
traded companies.
TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS
Sec. 901. Short title.
Sec. 902. Attempts and conspiracies to commit criminal fraud offenses.
Sec. 903. Criminal penalties for mail and wire fraud.
Sec. 904. Criminal penalties for violations of the Employee Retirement
Income Security Act of 1974.
Sec. 905. Amendment to sentencing guidelines relating to certain white-
collar offenses.
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
Commission.
Sec. 1104. Amendment to the Federal Sentencing Guidelines.
Sec. 1105. Authority of the Commission to prohibit persons from serving
as officers or directors.
Sec. 1106. Increased criminal penalties under Securities Exchange Act of
1934.
Sec. 1107. Retaliation against informants.
SEC. 2. <<NOTE: 15 USC 7201.>> DEFINITIONS.
(a) In General.--In this Act, the following definitions shall apply:
(1) Appropriate state regulatory authority.--The term
``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
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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
document 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
Securities 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. 78l), 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, shareholder, principal, accountant, or other
professional employee of a public accounting firm, or
any other independent contractor or entity that, in
connection with the preparation or issuance of any audit
report--
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(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 Commission 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 particular registered public
accounting firm; and
(B) auditing standards, standards for attestation
engagements, quality control policies and procedures,
ethical and competency standards, and independence
standards (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
association, 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
``registered 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, practices, 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)).
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(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 Securities
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. <<NOTE: 15 USC 7202.>> COMMISSION RULES AND ENFORCEMENT.
(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
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